FORM 8-A
Securities and Exchange Commission
Washington, D.C. 20549
For registration of certain classes of securities pursuant to section 12(b) or
(g) of the Securities Exchange Act of 1934
CBQ, Inc.
(Exact name of registrant as specified in its charter)
Colorado 84 1047159
(State of incorporation (I.R.S. Employer
or organization) Identification No.)
4851 Keller Springs, Ste. 228, Dallas TX 75258
(Address of principal executive offices) (Zip Code)
Securities to be registered' pursuant to Section 12(b) of the Act: None
If this form relates to the registration of a class of securities pursuant to
Section 12(b) of the Exchange Act and is effective pursuant to General
Instruction A.(c), check the following box. [ ]
If this form relates to the registration of a class of securities pursuant to
Section 12(g) of the Exchange Act and is effective pursuant to General
Instruction A.(d), check the following box. [X]
Securities Act registration statement file number to which this form relates:
033-14707-NY
Common Stock
(Title of class)
<PAGE>
Information required in registration statement:
Item 1. Description of Registrant's Securities to be Registered. Furnish the
information required by Item 202 of Regulation S-K or Item 202 of Regulation
S-B, as applicable. Incorporated by reference to Form S-18 filed by registrant
in its initial public offering.
Item 2. Exhibits.
List below all exhibits filed as a part of the registration statement:
1. Annual report on Form 10KSB for calendar year ended December 31, 1998.
2.a Quarterly report on Form 10QSB for three and nine month periods ended
September 30, 1999.
2.b Quarterly report on Form 10QSB for three and six month periods ended June
30, 1999.
2.c Quarterly report on Form 10QSB for three month period ended March 31, 1999.
2.d Amendment to quarterly report on Form 10QSB for three month period ended
March 31, 1999.
2.e Periodic report on Form 8KSB dated February 2, 1999, amending Form 8KSB
dated November 19, 1998 (Amendment No. 2)
2.f. Periodic report on Form 8KSB dated February 2, 1999, amending Form 8KSB
dated November 19, 1998 (Amendment No. 1)
2.g. Periodic report on Form 8KSB dated January 6, 2000
3. Not Applicable.
4. Incorporated by reference to Form S-18 filed by registrant in its initial
public offering.
5. Incorporated by reference to Form S-18 filed by registrant in its initial
public offering.
6. Not Applicable.
Signature
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereto duly authorized.
(Registrant) CBQ, Inc.
Date: January 7, 2000
By: /s/ John H. Harris
- ----------------------
John H. Harris, Chief Executive Officer
<PAGE>
Exhibits:
1. Annual report on Form 10KSB for calendar year ended December 31, 1998.
2.a Quarterly report on Form 10QSB for three and nine month periods ended
September 30, 1999.
2.b Quarterly report on Form 10QSB for three and six month periods ended June
30, 1999.
2.c Quarterly report on Form 10QSB for three month period ended March 31, 1999.
2.d Amendment to quarterly report on Form 10QSB for three month period ended
March 31, 1999.
2.e Periodic report on Form 8KSB dated February 2, 1999, amending Form 8KSB
dated November 19, 1998 (Amendment No. 2)
2.f. Periodic report on Form 8KSB dated February 2, 1999, amending Form 8KSB
dated November 19, 1998 (Amendment No. 1)
2.g Periodic report on Form 8KSB dated January 6, 2000
1. Annual report on Form 10KSB for calendar year ended December 31, 1998.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended: December 31, 1998 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number: 33 14707 NY
CBQ, Inc.
(Exact name of registrant as specified in its charter)
Colorado 84 1047159
(State or other jurisdiction) (I.R.S. employer)
of incorporation or organization identification number
4851 Keller Springs Rd., Ste. 213, Dallas, Texas 75248
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(972) 732 1100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Common Stock, $.0001 Par Value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Rule 405
of Regulation S-K is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing: On
April 9, 1999, the closing inside bid and asked prices for the shares of common
stock of registrant, which is the sole voting stock outstanding of registrant,
were $3.50 and $4.37, respectively. On that date, there were 21,275,332 shares
of common stock outstanding. Affiliates held 3,653, 114 shares of this stock;
thus, the aggregate market value of the voting stock held by non-affiliates
approximated $14,375,004.
Registrant had no revenues in 1998.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date: As of April 9, 1999, there were
approximately 21,275,332 shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the documents incorporated by reference and the Part of this Form
10-KSB into which the document is incorporated: None.
<PAGE>
PART I
Item 1. Description of Business:
Acquisition of CyberQuest, Inc.
On November 19, 1998, Freedom Funding, Inc., a Colorado corporation (Company),
entered into a reorganization agreement (Reorganization Agreement) with
CyberQuest, Inc., a Colorado corporation (CyberQuest), and the shareholders of
CyberQuest pursuant to which the Company acquired all of the outstanding
proprietary interest of CyberQuest in a stock for stock exchange which resulted
in CyberQuest becoming a wholly owned subsidiary of the Company and the
shareholders of CyberQuest acquiring control of the Company through their stock
ownership.
The Reorganization Agreement called for the immediate change of the name of the
Company to CBQ, Inc., and the immediate effectuation of a reverse one for four
(1:4) common share split. The Company completed this process during December,
1998. All further references in this report are to post split share figures.
The Company, under the Reorganization Agreement, issued 18,000,000 common shares
and 70,000 shares of the Class A: Redeemable, Convertible Preferred Stock of the
Company to the shareholders of CyberQuest in exchange for the issued and
outstanding shares of this subsidiary. Pursuant to the Reorganization Agreement
the existing director and sole executive officer resigned and the Company
appointed Messrs. Michael Sheriff (Chairman), James E. Malone and R.J. Pipes as
directors. Mr. Sheriff was then appointed Chief Executive Officer, Mr. Malone
President and Treasurer and Mr. William J. Flannery Secretary.
<PAGE>
The Series A Preferred Stock issued under the Reorganization Agreement consists
of 70,000 shares with a stated price of $10 per share, and has the following
features: (a) Dividend None. (b) Conversion None. (C) Redemption Elective and
cumulative as follows: (1) from and after November 19, 1998, and up to and
including November 18, 1999, the Company may redeem, at any time and from time
to time, all or any portion of up to 7,000 preferred shares at a price of $10
per share; (2) from and after November 19, 1999, and up to and including
November 18, 2000, the Company may redeem, at any time and from time to time,
all or any portion of (y) the preferred shares not redeemed under (1) and (z) up
to an additional 14,000 preferred shares at a price of $11.00 per share; (3)
from and after November 19, 2000, and up to and including November 18, 2001, the
Company may redeem, at any time and from time to time, all or any portion of (y)
those preferred shares not redeemed under (1) and (2) and (z) up to an
additional 21,000 preferred shares at a price of $12.00 per share; and (4) from
and after November 19, 2001, and up to and including November 18, 2002, the
Company may redeem, at any time and from time to time, all or any portion of (y)
those preferred shares not redeemed under (1), (2) and (3) and (z) up to an
additional 28,000 preferred shares at a price of $13.00 per share. (d)
Liquidation Preference None. (e) Sinking Fund None. (f) Voting Rights None. (g)
Additional Provisions In the event that the Company offers and sells at any time
during which any shares of Preferred Stock remain outstanding any share of
common stock of the Company at a price of less than $5.00 per share on a
private, non registered basis, the Company will grant to the holder(s) of any
then outstanding shares of Preferred Stock a warrant allowing the acquisition of
one share of common stock for each ten shares of common stock issued and sold.
The warrant will be exercisable for a period of one (1) year after grant at the
price for which the shares of common stock causing the imposition of this
provision were issued and sold.
Acquisition of Reliance Technologies
On March 15, 1999, the Company acquired Reliance Technologies, Inc., a privately
held Texas corporation (Reliance Technologies), soley in exchange for 1,000,000
shares of common stock. Further, the Company established a stock option plan for
the employees of Reliance Technologies which will allow them to acquire up to
100,000 shares of common stock at market when the options are granted. The
Company further agreed that it would fund the business plan of Reliance
Technologies in the cumulative amount of $250,000 within twelve months of the
closing date. Funded means that the Company will have arranged equity financing
or have provided equipment or services from outside suppliers. If the Company
does not fund or arrange this funding, Reliance Technologies has the right, but
not the obligation, to rescind the acquisition agreement. If rescinded, all
Company shares issued will be returned to treasury and all monies actually
funded will be returned. The addition of Reliance Technologies gave the Company
the technical know how to run the hardware and software in its business.
<PAGE>
Acquisition of Ypay:
The Company has agreed to acquire an interest in an entity owned by Mr. Sheriff.
Initially, the Company agreed to issue 1,000,000 shares of common stock to Mr.
Sheriff in exchange for 20% of an internet ISP which proposes to provide free
internet access, with the remaining 80% to be acquired when the Company had
arranged approximately $25,000,000 in funding to develop the business of the
ISP. The Company and Mr. Sheriff are presently renegotiating this acquisition.
Summary of CyberQuest's Business:
Internet Opportunity: Businesses have aggressively begun to use the
Internet as a fourth channel of distribution. Inter company electronic commerce,
propelled by the popularity of the World Wide Web (Web) and its perceived value
in cost savings, reduced order processing time and better information flow, is
expected to reach $3.2 trillion in goods and services by the year 2003,
according to Forrester Research, a recognized independent research firm. This
best case estimate is predicted if public and private synergy make buying and
selling on the Internet simple, secure and internationally viable . . .
Forrester defines E Commerce as the trade of goods and services in which the
final order is placed over the Internet.
Business to Business Internet Fundamentals: Management believes that
business entities must, in order to overcome the inefficiencies of traditional
sourcing and selling methods and to increase profits, accomplish the following:
Streamline Complex, Multi tiered Distribution Channels
Aggregate Fragmented Customer Bases
Reduce Excess Inventory
Avoid Channel Conflicts
Lower Sales and Marketing Costs
Lower Distribution Costs
Improve Cash Flow
Improve Pricing Data
<PAGE>
The Bid4itTM Virtual Marketplace: Bid4it (www.bid4it.com), the newest CyberQuest
E Commerce site, is designed to serve as an efficient, market driven sales
channel for industrial and consumer products over the Web and to address the
business drivers of corporate purchasing, resellers and consumers alike. The
bid4it on line Virtual Marketplace, modeled after NASDAQ, represents a new sales
format. Management believes that bid4it will be widely accepted because it
leverages the unique characteristics of the Internet to overcome the
inefficiencies of traditional sales and procurement channels.
Opportunity exists for a first mover company to establish a channel which
aggregates buyers and sellers and offers the advantages and benefits of scale
for both. Management believes that users will quickly accept bid4it due to its
easy to use graphical format. The bid4it graphical interface, forms and routines
are the same for every vendor, so buyers are saved the additional time and
expense of dealing with multiple vendors. In contrast, competitor Web sites
require the user to learn many different ordering systems, as each vendors' own
forms and routines are called, when the buy is being made. The Company believes
that this unique feature alone will cause users to place high value on bid4it as
a primary business application.
Bid4it is the only Web site, to management's knowledge, that is capable of
making a market, because malls, auctioneers and buying consortiums are not
designed to change prices based on the variability of supply and demand.
Instead, they act as a replacement for paper catalogs and do nothing to solve
the problems inherent in traditional sourcing and procurement methods.
Bid4it offers, through its dual operational path, a wide variety of business
products and consumer merchandise. With more than 1,000 product categories,
bid4it will offer more than 1,000,000 products to its buyers. From bearings to
sports equipment, bid4it will provide the most comprehensive product offering
that is available anywhere in the world. Using the Company's proprietary bid4it
Virtual Marketplace software, CyberMarketMaker version 2.0, customers bid in a
freely competitive market without the constraints of less flexible pricing that
characterize traditional retailing or the inconvenience or other limitations of
an auction. Management believes that the customer enthusiasm generated by this
format, the emergence of the Internet as an effective new sales channel and
bid4it's highly automated infrastructure combine to create a significant
opportunity for profitability.
<PAGE>
Bid4it sellers post asking prices for each product, along with a confidential
minimum floor price, and buyers' submit bids based on their needs.
CyberMarketMaker sorts the bids in order of submission and price of bid. The
earlier bid will win, based on available inventory, if two bids match the ask
price. Likewise, if multiple asks match a bid, the first ask placed will be
executed. In response to market activity, orders and bids, CyberMarketMaker will
adjust the asking prices up or down, thus, making a market and executing the
transaction in accordance with the controlling constraints. This Virtual
Marketplace format ensures instantaneous virtual negotiation between bidder and
seller in a free market making environment.
Bidders continuously maintain control of their bids, having the ability to
withdraw, modify or lower a bid from the privacy of their own password protected
home pages. Sellers also maintain complete control from the privacy of their
password protected home pages. Sellers, who remain anonymous, are in full
control of the terms of the sale. The seller may establish minimum quantities
and, in addition to the asking price, set a floor price, below which no sale can
occur. In addition, the vendor may remove items from the site at will or may
change quantities to reflect the vendor's current inventory position and are
free to accept any bid at their discretion. With this innovative way to purchase
goods and services on the Internet, the Company answers the needs of the
corporate community, small businesses, resellers and consumers by providing an
optimum marketplace in which to conduct business.
The Company believes that its selection key, which allows the buyer to select
either industrial or consumer product categories from the home page, will direct
the buyers' attention directly to the products sought. The ability of the buyer
to filter its home page to meet specific requirements will enhance buyer
interest, and attract and maintain a large and loyal customer base. Bid4it's
immense product mix gives customers the opportunity to bid on desirable goods
from a number of different product categories, mostly from well known, name
brand manufacturers. Sellers' ability to continually update their product and
price mix, combined with the bid4it Virtual Marketplace format gives customers
the ability to make exceptional deals every time they visit the site. By the end
of 1999 the Company expects to have more than a million products, valued in
excess of $500 million, available to its customers.
Customer satisfaction is assured through written contracts with vendors
regarding all aspects of commerce in accordance with the United States Uniform
Commercial Code. Buyers pay electronically when an order is executed and
CyberQuest holds the money for 31 days after shipment. Assuming customer
satisfaction, sellers are paid electronically on the 31st day, less a negotiated
transaction fee. Customer service functions are integrated and interactive,
using on line forms and E mail communication. The customer service staff also
offers assistance during office hours at 1 972 732 1100 or toll free 1 888 378
3162.
<PAGE>
CyberQuest expects to generate in excess of $150 million dollars in product
sales during 1999. Operating under the Principal Sales Model, the Company takes
title to the merchandise, but carries no inventory. Its transaction fees, i.e.
margins, are paid by the seller.
Market for Products:
Market Opportunity: Commerce conducted over the Web is expected to grow
dramatically from $2.6 billion in 1996 to over $3 trillion during 2003,
according to International Data Corporation (IDC), a Boston, MA market research
firm and Forrester Research, respectively. Management believes it is positioned
to become the dominant business to business Virtual Marketplace on the Internet.
To that end, management intends to leverage its position as a leading Internet
channel for brand name merchandise and to build upon its strategic relationships
with vendors encouraging use of the bid4it Virtual Marketplace for corporate
purchases of all types.
Target Markets: The target customer base was initially individual consumers
in order to build awareness and traffic levels. CyberQuest's nearest competitor
reported over 42% of registered bidders were corporations, even though the site
was weighted toward the consumer. As awareness mounts, corporate buyers and
small business owners will be targeted aggressively. The target seller base is
equipment manufacturers, major distributors, and resellers of hard goods; and in
some instances, services. Each segment will require specific custom features,
but generally each will require bid4it to provide efficiency over the current
methods employed to buy or sell similar products.
Management believes it offers an efficient and effective alternative to existing
distribution channels and a practical solution to a large and growing problem
for many vendors the disposal of excess merchandise. The disposal of excess
goods is a substantial financial and logistical burden for most companies,
because the goods are sold through a fragmented industry. Merchandise brokers
locate superstores and mass merchants, auction houses, catalogs, company stores
or manufacturer's outlet stores to liquidate products. In many cases, these
outlets are not committed to the resale of these goods and sell them only as a
supplementary product line or loss leader; concentrating instead on new or
higher margin products. More importantly, vendors have limited control over
pricing or product placement in this fragmented channel, and as a result, the
margins they realize on products are often adversely affected.
<PAGE>
Each year manufacturers dispose of significant volumes of excess merchandise,
including new, refurbished and closeout merchandise. Refurbished products are
those that typically require a nominal amount of service, such as minor repairs,
cleaning and re packaging, prior to being sold as refurbished goods. Closeout
merchandise includes new products that have or will shortly become obsolete,
typically due to a change in selling seasons or the introduction of new models.
While the market for refurbished and closeout products is difficult to measure,
management believes that several billion dollars of such merchandise is sold
each year. The PC and consumer electronics markets in particular are
characterized by significant quantities of such merchandise due to short product
life cycles and the prevalence of returned items through the consumer retailing
channel. According to IDC, the total PC market in the United States alone was
estimated to be greater than $65.6 billion in 1996. IDC estimates that the
portion of this market that ended up as refurbished and closeout goods exceeded
$3.8 billion in 1996. In addition, significant supplies of excess merchandise
characterize many other markets. For example, the automotive industry is beset
by a continual supply of Program Cars. Chrysler products alone are estimated to
represent over 600,000 such cars and vans a year. Available previously only at
dealer auctions, Program Cars are ideal for the bid4it Virtual Marketplace sales
format. While most people still like to feel the leather, more and more buyers
are visiting their local dealer to kick the tires and are then hopping on the
Internet to hunt for the best buy. Industrial products represent nearly as big a
market as the consumer market. According to The Kinsey Quarterly, . . . the US
maintenance, repair and operations (MRO) products business including items
ranging from brooms to light bulbs to simple motors . . . is worth $300 billion
Manufacturers and distributors have more than $10 billion yearly of surplus/slow
moving assets that need to be sold. Large corporations and utilities have
established formal Asset Recovery Departments to address this continuing
problem.
Sales of excess merchandise on bid4it will assist the vendor in avoiding channel
conflicts inherent in other distribution channels, where similar or identical
merchandise sells at different prices. By selling to a geographically broad
customer base, the vendor also reduces the cannibalizing effect that the sales
of excess merchandise can have on the distribution of new products in a limited
local area. Channel conflicts, which can undermine channel loyalty, are also
created and the vendors' brand image can be negatively affected. As a result,
vendors have a keen interest in accessing a distribution channel that enables
them to dispose of significant quantities of merchandise quickly and at the best
prices possible, without adversely affecting their traditional sales channels or
brand image. CyberQuest believes that it offers vendors an innovative way to
sell excess merchandise quickly at attractive prices and with substantially less
interference with the vendor's other marketing channels.
<PAGE>
CyberQuest's Virtual Marketplace format, with its ability to add new items
continuously, allows CyberQuest or the vendor to post items for sale immediately
upon receipt of the vendor's information. This increases the vendors' ability to
dispose of inventory quickly, thereby avoiding some of the inventory price
erosion and obsolescence that is typical in other channels. Vendors also obtain
attractive prices for their products especially when compared to other outlets.
The vendor is always in control of the final selling price because the asking
price is managed by the bid4it system within a vendor set price range. Vendors
are never at risk of selling a product for less than their established floor
price, and product may be withdrawn for sale at will. In addition, bid4it's
automated systems simplify the whole process, creating a convenient sales
channel for vendors. Convenient product entry forms are available on line from
within the vendor's password protected home page. Communication of pertinent
information from interested buyers is immediate and vendors may elect to accept
any bid, even below the established floor, if the other terms are enticing, such
as a high quantity or take all bid.
A sense of community is engendered by the constant communication among buyers,
vendors and bid4it, creating a sales forum that is more than a sales channel it
is a place where corporate purchasing managers and consumers alike can
participate in a very pure form of capitalism. This interactive shopping medium,
a community of interest, which creates a sense of being where the action is and
pro active advertising are expected to contribute traffic to the site.
Vendors of unique products also face challenges which bid4it easily addresses.
Rare wine brokers, for example, can find an eager audience of buyers who have
been frustrated by locally short supplies of connoisseur quality wines. Vendors
of autographed sports memorabilia and other one of a kind items will, by
expanding the audience of potential bidders, realize higher selling prices than
through traditional means, including auctions.
Market Size: The Internet now boasts 135 million users worldwide according
to Kevin Jones of Interactive Week magazine. Bid4it is available to those users
worldwide who have recognized browsers. The business to business MRO market
alone, which is in excess of more than $300 billion per year, holds the greatest
near term potential. Businesses are moving manufacturing and corporate
purchasing to the Web at an accelerating rate. This rapid movement has proven
the viability of the market and the willingness of buyers to adopt the Internet
as an effective, viable key element of the supply chain. When capital goods are
added to this forum, the total business to business market exceeds one trillion
dollars per year. With the continued acceptance of bid4it, CyberQuest will,
within a short time, offer both MRO and capital equipment to its customers. This
added capability will significantly enhance the Company's profitability.
<PAGE>
Competition: Competition against the bid4it Virtual Marketplace is expected
to come from several segments. Representative business to business competitors
are MRO Online, FastParts and FreeMarkets Online. These competitors do not
address the free market and are little more than electronic catalog sites with
cumbersome order entry and processing procedures. Management believes that
bid4it is the only site able to conquer the formidable challenges in this $300
billion business to business environment. Large Fortune 500 type companies may
elect to develop internal sites or Intranets to meet the same challenges that
now exist. Again, these efforts would seem to be directed at specific markets,
and management believes that these efforts can co exist with bid4it in a
symbiotic relationship.
The Internet auction sites, most notably Ebay, Onsale (ONSL) and FirstAuction,
represent the most formidable opponents in the Business to Consumer markets.
These sites were enormously successful in 1998. Ebay sold $27.9 million in the
first 9 months of 1998, while Onsale recorded $148 million in sales during the
same period. Onsale reports that registered bidders were buying 41,000 items
each week at the quarter ending June 30, 1998. During the third quarter of 1997,
Onsale invested heavily in Internet advertising and other marketing programs. In
1998 Onsale also entered into an joint venture agreement with Softbank
Corporation to perform on line auctions for the Japanese market and to supply
their technology to VerticalNet to provide online auctions for vendors,
manufacturers and businesses that buy and sell industrial products. Onsale
passed off its small ticket, person to person auction business to the Internet
directory Yahoo! and still attracts 100,000 daily to its site.
FirstAuction, another direct competitor, is owned and operated by The Internet
Shopping Network (ISN), a large, mall type Web site which was launched in late
1994. ISN is owned by Home Shopping Network, the multi billion dollar TV
broadcast retailer. FirstAuction debuted in the summer of 1997, following a
format similar to Onsale.
<PAGE>
Management expects one or more of these sites to enter into direct business to
business commerce via the Internet. The challenge will be to differentiate the
bid4it Virtual Marketplace as superior to the auction format. CyberQuest must
also successfully build a brand identity which positions bid4it as the preferred
site for corporate buyers of MRO and capital equipment. These types of products
are typically not found at auction sites.
As business to business activity grows, management believes that the market
will support and the bid4it Virtual Marketplace can co exist with the auction
type sites, each with its own market identity and niche. Management must
identify new strategic partnership opportunities which are synergistic to the
bid4it Virtual Marketplace, but not likely targets for an auction site
partnership. The identified partnerships would function similarly to a sub
license arrangement. The difference in the two is that instead of building a
customized site for the sub licensor where their buyers would, upon selecting
(clicking on) a specified product , come to bid4it from the partner's Web site
to place their bids. This arrangement would net the partner a commission, or
alternatively, would net bid4it a commission depending upon the agreement of the
partners.
As business to business sales increase, CyberQuest's challenge will be to
introduce a continual stream of new trading partners to become users of the
bid4it Virtual Marketplace. This means that the competition for such new
business users will more likely come from those businesses' unwillingness to
change their traditional purchasing methods rather than from any like or similar
Internet competitor to bid4it. In a recent survey conducted by Thomas Register
and Visa U.S.A., 21% of respondents (drawn from nearly 2,000 corporate
purchasing decision makers representing companies in a variety of industries
(including manufacturing, engineering, government, wholesale and retail) said
they plan to make more than half of their purchases over the Internet by year's
end 1998. As expected, telephone and fax are still the most preferred way for
companies to make purchases.; however, findings from the survey indicate that
payment trends are changing, with online purchasing becoming increasingly more
important.
The field of direct competitors is expected to continue to grow and CyberQuest
intends to maximize its marketing, advertising and public relations efforts
while few market leaders are clearly established. Further, management will
emphasize efforts to establish relationships with leading on line content
providers and commerce companies, and leading manufacturers in key product
categories to secure merchandise supply and build competitive barriers to entry.
Management also expects indirect competition to come from any Internet E
Commerce site which sells similar products, and also from traditional channels
of supply.
<PAGE>
Business Strategy:
Objective: CyberQuest's objective is to become the dominant business to
business Virtual Marketplace on the Internet. CyberQuest also intends to
leverage its position as a leading Internet channel for brand name merchandise
to build strategic relationships with vendors who will use the Virtual
Marketplace ultimately to purchase from each other. To that end, the Company is
seeking additional capital in order to pursue the following key strategies:
Create Market Awareness and Brand Recognition: Management believes that
bid4it will become a leading brand name in on line commerce. CyberQuest operates
in a market in which its brand franchise is critical to attracting high quality
vendors and a high level of business customer traffic. Accordingly, management's
strategy is to promote, advertise and increase its visibility through a variety
of marketing and promotional techniques. The formation of strategic
relationships with major Internet Service Providers (ISPs), use of search
engines and directories and advertising on leading Web sites and in targeted
trade publications will complement an ongoing public relations campaign. In
particular, CyberQuest will establish relationships with leading on line content
providers and commerce companies to attract traffic to its sites, secure
merchandise supply and build competitive barriers to entry.
Strategic Relationships:
EDS. EDS represents a significant opportunity for CyberQuest. As the
licensor of the core technology, EDS has a vested interest in CyberQuest's
success. In addition, EDS is potentially a large customer as the original code
was developed for EDS' internal use.
Search Engines. Management has conducted short-term tests of banner
advertising on both Yahoo! and Infoseek. In 1999 CyberQuest will focus on
increased use of banner ads on all major search engines. Additionally, where
available, CyberQuest will contract for applicable key words.
Portal Sites. Within its projected budget, CyberQuest will initiate
discussions with major content providers (portal sites), such as America Online
(AOL/Netscape), Excite, Lycos, Ziff Davis and ESPN. Bid4it was chosen as an
Excite certified merchant in the spring of 1998. With the intent to build site
traffic levels, management will use the pattern established by other high
traffic commerce sites such as Amazon.com, Onsale and FirstAuction, among
others. This may take the form of key words, links, banner ads, or some form of
revenue sharing as demonstrated by AOL's interest in this area.
<PAGE>
Advertising Networks. Management is in early discussions with an Internet
start up advertising network, which it believes will re write the book on
Internet advertising, to form a joint venture or to establish most favorable
early adopter terms.
Vendors. All sellers on bid4it are actively encouraged to promote the site
where possible, as it is in the best interest of all parties. This can take the
form of links exchanges or banner ads on seller Web sites, press releases, or
direct promotion in alternative advertising. Commission arrangements can be made
with vendors who want to put links to bid4it on their Web sites. Amazon.com has
proven this to be a highly successful arrangement with book publishers.
Advertising: Management believes that the most efficient and effective
advertising available is on the Internet itself. Consequently, in 1999 the bulk
of CyberQuest's ad budget will be committed to on line advertising, primarily
banner ads, and links and key words where available. CyberQuest will employ the
services DoubleClick, Inc., 24x7, or a similar media company which specializes
in Internet advertising, to assist in ad positioning, rotation, and management.
Based upon its rather limited operating history and experience with banner ads,
management believes that its conservative assumptions demonstrate that its
revenue goals can be achieved in 1999.
Promotions: In order to encourage site visitors to bidder conversion,
CyberQuest will utilize a variety of promotions and product information essays
from industry experts. CyberQuest will solicit seller participation in the
future in order to increase promotion variety and defray associated costs.
Public Relations and Print Media: To date, public relations and print media
have been focused on the original launch date of bid4it and related events.
CyberQuest has received favorable press as shown. In the future, focusing on
brand awareness and demographic trafficking, all non Internet advertising will
feed off and funnel to CyberQuest s Internet advertising campaigns. Management
has developed a publicity work schedule for 1999 to insure timeliness in meeting
future closing dates for advertising and editorial (article subject matter)
calendars.
<PAGE>
Vendors: CyberQuest's ability to attract, secure and obtain brand name products
for its bid4it Virtual Marketplace is key to its success. Management plans to
build its business to business marketing staff to facilitate and secure long
term relationships with a wide variety of vendors. CyberQuest seeks to be its
vendors' preferred choice for selling both current and excess merchandise.
CyberQuest intends to strengthen its vendor relationships by offering more
convenient service through its automated order processing, superior logistical
arrangements and prompt payment processes. In addition, CyberQuest believes its
continuous Virtual Marketplace process makes it a convenient sales channel for
vendors to liquidate large volumes of merchandise; selling to resellers,
corporations and consumers simultaneously. Management believes a broad array of
merchandise and commodities can be sold effectively through its bid4it Virtual
Marketplace format. Unique and rare item vendors will also find a home at
bid4it. CyberQuest believes the types of products which could be sold over the
bid4it Virtual Marketplace is limitless and the sale of services will eventually
be included.
Management believes vendors are attracted by the number of buyers who are
searching for perceived bargain prices and the inherent advantage of setting the
price and controlling the process. Accordingly, CyberQuest intends to continue
offering vendors the opportunity to sell excess, new/current or one of a kind
merchandise at the best prices available in the market and to automate the
process as fully as possible.
Management believes both industrial and consumer buyers are attracted by the
wide array of opportunities to buy desired merchandise at bargain prices and the
knowledge that it is a secure transaction. Management believes that a
significant opportunity exists to develop incremental revenue, including
expanding its product mix with other products that are well suited for the
Internet's electronic format.
Production Distribution: CyberQuest's primary responsibility through bid4it
is to manage the bid and ask match transaction set. Sellers are contractually
responsible for inventory, shipment and management of their portion of bid4it
site operation. In those cases where sellers desire to relinquish bid4it
operation, CyberQuest will establish partnering arrangements/strategic
relationships with key manufacturers and distributors who will drop ship to
customers or consign to bid4it's contracted, fulfillment warehouse. This
inventory less distribution is expected to produce potentially higher margins
and will serve to increase the product mix and the number of items offered for
sale.
<PAGE>
Sub Licensing Core Technology: CyberQuest will sub license its proprietary
software to third parties and will operate and maintain the derivative versions
for the sub licensors on a fee and royalty basis. Sub licensing will be to
selected markets that complement and add to bid4it, but do not impede its
intended growth or operations. CyberQuest has completed a sub license royalty
agreement with a corporation known as Bid4ic's, Inc. This company intends to
pursue the brokered integrated circuit and component marketplace.
Web Sit Advertising: Cyberquest intends to leverage the high level of
traffic on its Web site to provide an attractive reason for third party
advertising on its Web site. CyberQuest will use the services of an experienced
media firm to market its site real estate, and expects to receive approximately
$10 $25 per thousand impressions sold. Management believes that the
incorporation of business to business site advertising will add significant
dollars to its revenue stream.
Web Sit Development: As an early player in Internet Web site and E Commerce
development, management garnered many awards and maintains a high level core
competence in the field. CyberQuest is capable of acting as its own project
manager in Web site development and software development service projects for
its continuing operations. This core competence is critical to future success
given the importance of its Web sites in attracting buyers and sellers to use
its services. Although not a principle element of growth, CyberQuest will
provide certain of the services to bid4it customers on a fee basis.
Patent pending Proprietary Software: CyberQuest believes that one of its
competitive advantages is its internally developed patent pending proprietary
software that is specifically designed for its Internet Virtual Marketplace.
CyberQuest has significantly enhanced the original software which was acquired
from EDS on a royalty license basis. EDS expended in excess of thirty man months
in the development of the code and database structure. CyberQuest has agreed to
pay EDS a 5% royalty on net revenues over a maximum period of eight years. All
derivatives are the exclusive property of CyberQuest, which has, based upon its
ownership of all derivatives, cross licensed bid4it to EDS. EDS will pay
CyberQuest a 20% royalty on any revenue derived from sublicensing the derivative
code.
The software is capable of conducting automated mini markets for millions of
products and customers, managing bids and asks, processing customers' orders and
payments, coordinating and performing order fulfillment and providing customer
support functions. CyberQuest intends to enhance its bid4it software to provide
an even more compelling buying and selling experience, to improve efficiency
within the vendor interface and create an experience which bidder and seller
alike will associate with increased profits.
<PAGE>
Bid Placement: Bid4it provides a graphical user interface (GUI) interface
for buyers to enter bid requests. The buyer enters a bid either by accepting a
seller's asking price for a particular product, or by specifically setting a
price at which they wish to purchase the product. The original buyer who placed
it may update the bid at any time. Except for shipping information, the buyer's
identity remains confidential.
A bid includes an effective and expiration date, a minimum and maximum order
quantity, and the unit price the buyer is willing to pay. The buyer on private,
password protected, unique bidder home pages manages all bids and orders. Buyers
will also be able to establish buying criteria and let automated processes
complete the transaction.
Ask Placement: Bid4it provides both an EDI (Electronic Data Interchange)
for batch transactions and a GUI interface which sellers may use to enter asking
prices and floor prices (a confidential minimum the seller is willing to
accept). The seller is responsible for maintaining the inventory levels to
support the asks placed on the system. The asking and floor prices may be
updated at any time by the seller that placed the ask price. Once the proper
data is input, by batch or GUI forms, bid4it processes are completely automated,
or may be entered from the seller's home page.
An Ask includes an effective and expiration date, a minimum and maximum order
quantity, and the minimum unit price the seller is willing to accept. The seller
may also specify a required lot size. Sellers manage the process through unique,
password protected seller home pages. In addition sellers may specify an
unlimited number of sub sellers or agents, each with their own home page. In
this manner a complete sales/marketing department can be active on bid4it with
each product specialist having complete control of the products under his
jurisdiction.
CyberMarketMaker Patent Pending: Bid4it is an automated quotation system
(Virtual Marketplace) for products and services modeled after the NASDAQ stock
exchange. Bid4it is the market maker for the products listed on the site. The
bid4it CyberMarketMaker buys and sells, but to two distinct groups. Sellers will
also most likely be buyers, and buyers will also be likely to become sellers;
therefore, there is no bid4it spread between asks and bid prices. CyberQuest
will make its money based on terms negotiated with the sellers.
<PAGE>
All asks and bids for a particular product are placed in a corresponding book,
and processed in a FIFO manner. CyberMarketMaker evaluates market activity, and,
in response to orders and bids, moves the asking prices up or down, but never
below the seller's floor price. CyberMarketMaker matches bids and asks in an
asynchronous way. Logically, CyberMarketMaker exists for each defined product in
the bid4it system. When a bid and ask are matched, bid4it verifies buyer payment
and places a purchase order with the seller.
Notification: Bid4it's default communication with buyers and sellers is by
e mail and hypertext markup language (HTML) forms. In the case of sellers, an
EDI capability is offered to facilitate efficiency. When a bid and ask are
matched, a message is sent to the successful bidder, and a purchase order is
placed with the seller. Upon shipment, the bidder receives e mail notification
and a copy of the receivables (credit card) invoice.
Special notification options are offered to sellers for exception case
processing. For example, when a bid quantity exceeds a pre defined amount and
the bid price does not match the seller's asking price, the seller may receive
notification, in addition to e mail, by fax, pager or telephone call.
Trademarks: CyberQuest has trademarked bid4it and CyberMarketMaker, and will
vigorously defend any infringement against the bid4it patent claims for market
maker functionality and the bid4it look and feel. Among others, CyberQuest owns
the domain names: bid4it.com, goodstuffcheap.com, shop4it.com, dallas
ftworth.com and cbq.com.
Item 2. Description of Property: The Company, as of the date of this report,
owned no real or personal property, tangible or intangible, other than the
shares of its wholly-owned subsidiary. The executive offices of the Company are
being provided by the subsidiary free of charge on a month-to-month basis. These
offices are located at 4851 Keller Springs Rd., Ste. 213, Dallas, Texas 75248.
The telephone number at this address is (972) 732 1100.
Item 3. Legal Proceedings: No material legal proceedings to which the Company
(or any officer or director of the Company, or any affiliate or owner of record
or beneficially of more than five percent of the Common Stock, to management's
knowledge) is a party or to which the property of the Company is subject is
pending, and no such material proceeding is known by management of the Company
to be contemplated.
Item 4. Submission of Matters to a Vote of Security Holders: There were no
meetings of security holders during the period covered by this report.
<PAGE>
Item 5. Market for Common Equity and Related Shareholder Matters: As of April 9,
1999, there were approximately 21,275,332 shares of Common Stock issued and
outstanding, which were held of record by approximately 153 shareholders. The
Common Stock is currently quoted on the Bulletin Board maintained by the
National Association of Securities Dealers, Inc., under the symbol CBQI. The
following table sets forth the range of high, low and closing bid and asked
prices per share of the Common Stock as reported by National Quotation Bureau,
Inc. for the period indicated.
Calendar Quarter High Bid Low Bid High Ask Low Ask
- ---------------- -------- ------- -------- -------
June 30, 1998 0.25 0.15625 0.75 0.3125
September 30, 1998 0.21875 0.125 0.625 0.375
December 30, 1998 7.00 0.125 8.25 0.50
March 31, 1999 9.25 2.125 10.00 3.00
The above prices represent inter-dealer quotations without retail mark-up,
mark-down or commission, and may not necessarily represent actual transactions.
Further, the above prices have been adjusted to reflect two previous reverse
share splits . On April 9, 1999, the closing inside bid and asked prices for the
Common Stock were $3.50 and $4.37, respectively. On that date there were six
market makers publishing quotes.
The Company has paid no dividends on the Common Stock since inception and does
not expect to pay dividends in the foreseeable future. There are, however, no
restrictions on the payment of dividends.
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations:
Results of Operations: The Company had no operations, other than its search for
a business opportunity, from inception through 1988. In 1989, these efforts
ceased due to lack of working capital. In 1997, this business plan was again
implemented due to an agreement with a former officer and director to infuse
working capital and services as needed up to the amount of $100,000. On November
19, 1999, the Company acquired CyberQuest, the business and operations of which
are discussed above under Item 1.
Liquidity: The Company has not generated any cash flows from operating or
investing activities since inception. Operating capital was primarily provided
from inception through 1987 from the proceeds of an initial funding prior to a
public offering and then from the public offering itself. The Company then was
extended credit through a former officer and director, all of which was
subsequently converted to common stock. The Company is now in search of
development capital for the purpose of expanding its operations.
<PAGE>
Compliance with Beneficial Ownership Reporting Rules: Section 16(a) of the
Securities Act of 1934, as amended (Exchange Act), does not apply to the Company
since it is required to file its periodic reports by virtue of Section 15(d) of
the Securities Act. The Company anticipates that it will, subsequent to the
filing of this report, file to list its common stock under Section 12 of the
Exchange Act and, thereby, to become subject to Sections 13 and 16 of the
Exchange Act.
Item 7. Financial Statements:
HALLIBURTON, HUNTER & ASSOCIATES, P.C.
Certified Public Accountants
To the Board of Directors and Shareholders
CBQ, Inc. and Subsidiary
(A development stage company)
We have audited the accompanying balance sheets of CBQ, Inc. And Subsidiary
(formerly FREEDOM FUNDING, INC.) (a development stage company) as of December
31, 1998, December 31, 1997, and the related statements of operations,
stockholders' equity, and cash flows for the three years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audit, the financial statements referred to above
present fairly, in all material respects, the financial position of CBQ, Inc.
and Subsidiary (formerly FREEDOM FUNDING, INC.) (a development stage company),
as of December 31, 1998, and December 31, 1997, and the results of its
operations and cash flows for the three years then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has suffered recurring losses from operations
that raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in reference to these matters are described in Note
3. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ Halliburton, Hunter & Associates, P.C.
Littleton, Colorado
March 27, 1999
<PAGE>
CBQ, Inc. and Subsidiary
(formerly FREEDOM FUNDING, INC.)
(a development stage company)
BALANCE SHEETS
December 31,
1998 1997
Assets:
Current Assets:
Cash $ 97,907 $ --
--------- ---------
Equipment, at cost:
Computers and related equipment 68,905 --
Furniture and fixtures 5,954 --
--------- ---------
74,859 --
Less accumulated depreciation 38,960 --
--------- ---------
40,899 --
Other assets:
bid4it technology, less
amortization of $112,500 37,500 --
Organization costs, less
amortization of $133 667 --
Goodwill, less amortization
of $12,000 48,000 --
Deposits
7,259 --
--------- ---------
Total Assets $ 232,230 $ --
========= =========
Liabilities and Stockholders' Equity :
Current Liabilities:
Accounts payable $ 105,918 $ 54,421
Accrued royalties 79,382 --
Accrued expenses, other 31,203 --
Deposit 2,500 --
Officer Advances 2,575 --
Total Liabilities 221,578 54,421
--------- ---------
Stockholders' Equity:
Preferred stock,
par value $.001 per share
Authorized 100,000,000
shares; 70,000 shares issued 70 --
Common stock,
par value $.0001 per
share. Authorized
500,000,000 shares;
issued 21,275,332 2,640 --
Additional
paid-in capital 209,682 124,910
Accumulated deficit
during development
stage (201,740) (180,161)
--------- ---------
Total stockholders' equity
(deficit) 10,652 (54,421)
--------- ---------
Total liabilities and stockholders'
equity (deficit) $ 232,230 --
========= =========
See accompanying Notes to Financial Statements
<PAGE>
CBQ, Inc. and Subsidiary
(formerly FREEDOM FUNDING, INC.)
(a development stage company)
STATEMENTS OF OPERATIONS
Years ended December 31,
1998 1997 1996
Revenues $ -- $ -- $ --
Operating Expenses 21,579 55,021 --
-------- -------- ------
Net Profit (Loss) $(21,579) $(55,021) $ --
======== ======== ======
Loss per share * * *
(* negligible in amount)
See accompanying Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
CBQ, Inc. and Subsidiary
(formerly FREEDOM FUNDING, Inc.
(a development stage company)
STATEMENTS OF STOCKHOLDER'S EQUITY
Additional Retained
Preferred Stock Common Paid-In Earnings
Shares Par Value Shares Par Value Capital (Deficit) Total
------ --------- ------------------------- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
December
31, 1995 -- -- 2,301,300 230 124,910 (125,140) --
Net Loss for
year ended
December 31, 1996 -- -- -- -- -- --
Balance at
December 31, 1996 -- -- 2,301,300 230 124,910 (125,140) --
Issuance of
stock for
cash and
services -- -- 6,000,000 600 -- -- --
Net Loss for
year ended
December 31, 1997 -- -- -- -- -- (55,021) (55,021)
Balance at
December 31, 1997 -- -- 8,301,300 830 124,910 180,161 54,421
Reverse 1:5
Share Split -- -- 6,025,968 -- -- -- --
Stock issued for
100% of the assets
of CyberQuest 70,000 70 18,000,000 1800 30,361 -- 32,231
Net Loss for
year ended
December 31, 1998 -- -- -- -- -- (21,579) (21,579)
Balance at
December
31, 1998 70,000 70 20,275,332 $ 2,640 209,682 (201,740) 10,652
See accompanying Notes to Financial Statements
</TABLE>
<PAGE>
CBQ, Inc. and Subsidiary
(formerly FREEDOM FUNDING, INC.)
(a development stage company)
STATEMENTS OF CASH FLOW
Years Ended December 31,
1998 1997 1996
Cash flows from operating activities:
Net loss from operations: $ 21,579 $ (55,021) --
Decpreciation and amortization 5,403 -- --
(16,176) (55,021) --
Changes in assets and liabilities:
Accounts payable (62,471) 54,421 --
Deposits 2,500 -- --
Officer advances 225 -- --
Net cash (used): (75,927) (600) --
Cash flows from investing:
Purchase of equipment (6,182) -- --
Cash flows from financing:
Stock exchange 180,011 600 --
Increase in cash 97,907
Cash at beginning
of period -- -- --
Cash at end of period 97,907 -- --
========= ========= ==
See accompanying Notes to Financial Statements
<PAGE>
CBQ, Inc. and Subsidiary
(formerly FREEDOM FUNDING, INC.)
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
1. Organization and Nature of Business: CBQ, Inc., (formerly Freedom Funding,
Inc.) a Colorado corporation, was incorporated September 18, 1986, under the
laws of the State of Delaware, and changed its situs to Colorado in 1989. Since
inception, the Company has been in the development stage. The Company's primary
intended activity is to engage in all aspects of review and evaluation of
private companies, partnerships or sole proprietorships for the purpose of
completing mergers or acquisitions with the Company, and to engage in mergers
and acquisitions with any or all varieties of private entities. On November 19,
1999, the Company acquired a wholly owned subsidiary, CyberQuest, Inc., which
had recently purchased the assets and business of CyberQuest, Ltd. As a result
of this acquisitions, the Company is now a full service internet development
company, specializing in developing, implementing and maintaining creative
business WebSites, Commercial Sites and Database Development.
CyberQuest has also developed a straight forward method that frees small
business from having to integrate and develop significant amounts of software
and manage the internet ite. The Company's internet sites, goodstuffcheap,
bid4it and shop4it.com allow clients to place their products and services on the
Internet quickly and inexpensively and to begin transacting commerce over the
Net.
2. Acquisition of Subsidiary: On November 19, 1998, the Company acquired all of
the assets and assumed the liabilities of CyberQuest, Inc., in exchange for
18,000,000 shares of its $.001 par value common stock and 7,000 shares of it
$.01 par value preferred stock. The net book value of the assets acquired was
$32,231, which included cash of $180,011.
<PAGE>
3. Going Concern: Due to lack of working capital and lack of selected merger or
acquisition candidates, as well as recurring operating losses, there is
substantial doubt of the Company's ability to establish itself as a going
concern and its success is dependent upon the Company obtaining sufficient
financial capital to continue its development activities and, ultimately, to
achieve profitable operations.
4. Basis of Accounting: The Company recognizes income and expenses on the
accrual basis as earned or incurred. Equipment is recorded at cost. Computers
and related equipment are depreciated on a 3 year life and furniture and
fixtures on a 7 year life. The Bid4it technology, with an original cost of
$150,000, is being amortized over a 5 year life. Goodwill is also amortized over
a 5 year period, as are organization costs.
Use of estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that effect the financial statements at and during the reporting
periods. Actual results could differ from these estimates.
Income taxes: The Company has a net operating loss for income taxes. Due to the
regulatory limitations in utilizing the loss, it is uncertain whether the
Company will be able to realize a benefit from these losses. Therefore, a
deferred tax asset has not been recorded. There are no significant tax
differences requiring defarral.
5. Common Stock Exchange: During 1998, the Company settled liabilities of
$54,421 in exchange for 200,000 shares of common stock.
6. Preferred Stock Redemption: The preferred stock issued is redeemable at the
option of the Company as follows:
7,000 shares at the greater of $10.00 per share or the traded market value of
the preferred stock on or before October 23, 1999 14,000 shares at the greater
of $10.715 per share or the traded market value of the preferred stock on or
before October 23, 2000 21,000 shares at the greater of $11.905 per share or the
traded market value of the preferred stock on or before October 23, 2001
28,000 shares at the greater of $12.50 per share or the traded market value of
the preferred stock on or before October 23, 2002
<PAGE>
7. Option to Purchase Common Stock: The Company's board of directors has
authorized the issuance and delivery of up to 280,000 shares of its common stock
pursuant to employment agreements at any agreed upon price of $.50 per share.
8. Subsequent Event and Option to Purchase Common Stock: The Company entered
into a consulting agreement on February 15, 1999, the object of which is to
achieve visibility for the Company on the public market. The agreement is for
three months. The Company also granted an option for the purchase of 300,000
shares of the Company's common stock as follows: 100,000 shares at the closing
bid price at the time of the agreement, 100,000 shares at the bid price plus
$1.00 and 100,000 shares at the bid price plus $2.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure: This item is not applicable to the Company.
PART III
Item 9. Directors and Executive Officers of the Company: The following table
sets forth all current directors, executive officers and significant employees
of the Company and of its subsidiary, as well as their ages:
Name Age Position with Company
---- --- ---------------------
Michael L. Sheriff 54 Chairman of the Board of Directors,
Chief Executive, Financial and
Accounting Officer and Treasurer
James Malone 58 President and Director of the
Company
Tony Benton 32 Chief Technology Officer of the
Company and of Reliance
Technologies, Director of Reliance
Technologies
Greg Allen 36 Director, President and Chief
Executive Officer of Reliance
Technologies
R.J. Pipes 45 Director of the Company
No current director has any arrangement or understanding whereby he is or will
be selected as a director or nominee. Directors and executive officers will hold
office until the next annual meeting of shareholders and until their respective
successors have been duly elected and qualified or until they earlier
resignation. Officers are generally elected by the Board of Directors at its
annual meeting immediately following the shareholders' annual meeting and hold
office until their death or until they earlier resign or are removed from
office. The Company does not have any standing audit, nominating or compensation
committees, or any committees performing similar functions.
<PAGE>
Profiles of Directors and Executive Officers of the Company and of its
Subsidiary:
Management Team:
Michael L. Sheriff (Chairman of the Board of Directors, Chief Executive,
Financial and Accounting Officer and Treasurer of the Company): Mr. Sheriff has
been the Chairman of the Board of Directors, Chief Executive, Financial and
Accounting Officer and Treasurer of the Company since its acquisition of
CyberQuest. He has over 25 years experience in the computer and
telecommunications industry and has been a principal of Cyberquest since
January, 1996. He founded and developed, in 1994, Good Stuff Cheap, a pioneer in
Internet based retail sites. Good Stuff Cheap, according to Point
Communications, an Internet survey group, was one of the top five retail sites
on the Internet in 1994. Mr. Sheriff also was, from 1990 until 1995, the former
Chairman, President and CEO of Action Fax International, Inc., which operates
one of the largest public fax networks in the world and was an innovator in the
fax services industry. Prior to Action Fax, Mr. Sheriff was the founder and
President of First National Computer Corporation, which pioneered the rental of
personal computers. Under his direction, First National Computer became one of
the largest PC rental firms in the United States. In 1983, Mr. Sheriff co
founded and was Vice President of Five Dimensions Software, Inc., which designed
software systems for the rent to own television and appliance industry,
installing over 900 systems. Mr. Sheriff has held senior sales, marketing and
management positions with Data Design & Development, Inc., National
Semiconductor, Northern Telecom, SYCOR, Inc., and SINGER. Mr. Sheriff received a
Degree in Business Administration from the University of Denver in 1968.
James Malone (Director and President of the Company): Mr. Malone has been a
director and President of the Company since its acquisition of CyberQuest. He
has more than thirty years of experience in the industrial markets. Before
joining the Company, Mr. Malone, as the President and CEO of Jemco Industries,
Inc., has been involved in the sales, engineering and esign of automated
material handling systems and components. His company was one of the pioneers in
developing totally automated material handling systems for connectors, tubing
and casing used in the oil field services industry.
<PAGE>
Prior to starting Jemco in July of 1970, Mr. Malone had ten years of experience
with a major manufacturer of Power Transmission and Material Handling Equipment
that operated eighteen warehouses and sales offices throughout the United
States. His responsibilities ranged from District Manager to Vice President,
Sales and Marketing.
Mr. Malone is a professional certified in Material Handling and Material
Management by the International Material Management Society. He is a member of
several professional organizations, including the American Institute of Plant
Engineers, the Power Transmission Representatives Association and the
Manufacturer's Agents National Association.
Tony Benton (Chief Technology Officer of the Company and of Reliance
Technologies, Director of Reliance Technologies): Mr. Benton has been the Chief
Technology Officer and a director of RelianceTechnologies since inception, and
Chief Technology Officer of the Company since March 16, 1999. Prior to Reliance
Technologies, Mr. Benton worked with a computer consulting firm. Mr. Benton
received a Bachelor of Science Degree in Computer Engineering from Texas A&M
University in 1991.
Greg Allen (Director, President and Chief Executive Officer of Reliance
Technologies): Mr. Allen has been a director and the President and Chief
Executive Officer of Reliance Technologies since inception. From October, 1994,
until September, 1995, he was a software manager with Canmax Retail Systems. Mr.
Allen received a Bachelor of Science Degree in Computer Science from Texas A&M
University in 1991. He also took courses towards obtaining a Master of Science
Degree in Computer Science from East Texas State University, but did not
complete the degree.
R.J. Pipes (Director of the Company): Mr. Pipes has been a director of the
Company since its acquisition of CyberQuest. He has been a partner in Harvard
Capital, L.L.C., since 1995, and in that capacity has been engaged in
investments in financial obligations and small operating companies. From 1991 to
1994, Mr. Pipes worked for U.S. Recovery, Inc., which engaged in investments in
real estate, financial obligations and small operating companies. Mr. Pipes
received a degree in business from Southern Methodist University in 1975 and a
Juris Doctorate from Texas Tech School of Law in 1978.
Item 11. Security Ownership of Management and Certain Others: Based on
information which has been made available to the Company by its stock transfer
agent, the following table sets forth, as of April 9, 1999, the shares of Common
Stock owned by each current director, by directors and executive officers as a
group and by each person known by the Company to own more than 5% of the
outstanding Common Stock:
<PAGE>
Title of Class Name of Number of Shares
Beneficial Owner
Percent of Class(1)
Common Stock CyberQuest Ltd. 1,880,000 8.88%(2)
Common Stock Michael Sheriff 900,000 4.42% (2)
Common Stock Joseph Pipes 1,800,000 8.88% (2)
Common Stock Tony Benton 436,577 2.4%
Common Stock Greg Allen 436,577 2.4%
Common Stock Lynn Elliott 3,496,050 16.24%
Common Stock Cynthia Jared 3,496,050 16.24%
Common Stock R. Wayne Duke 3,496,050 16.24%
Common Stock Midland, Inc. 1,315,800 6.40%
Directors and Executive 3,653,114 17.25%
Officers as a Group:
(1) Based on approximately 21,275,332 shares of common stock issued and
outstanding on April 9, 1999. (2) CyberQuest, Ltd., is a limited partnership.
Mr. Sheriff owns approximately 13.25% of the outstanding beneficial interest of
this entity. Mr. Pipes owns approximately 70% of the outstanding beneficial
interest of this entity and is the investment partner and president of the
corporate general partner of this entity. For this reason, the entire beneficial
ownership of CyberQuest, Ltd., has been attributed to Mr. Pipes. Mr. Pipes also
has an option to acquire 80,000 shares of common stock. These shares are
included in this figure.
Item 12. Certain Transactions:
The Company has agreed to acquire an interest in an entity owned by Mr. Sheriff.
Initially, the Company agreed to issue 1,000,000 shares of common stock to Mr.
Sheriff in exchange for 20% of an internet ISP which proposes to provide free
internet access, with the remaining 80% to be acquired when the Company had
arranged approximately $25,000,000 in funding to develop the business of the
ISP. The Company and Mr. Sheriff are presently renegotiating this acquisition.
<PAGE>
Item 13. Exhibits and Reports on Form 8-K:
(a) Exhibits:
3.1 Preferred Stock Resolutions
10.1 Reorganization Agreement between the Company and CyberQuest
10.2 Acquisition Agreement between the Company and Reliance
(b) Forms 8-KSB: November 19, 1998, and Amendment.
SIGNATURES
In accordance with the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas, on the 14th day of April, 1999.
CBQ, INC.
(Registrant)
/s/ Michael Sheriff
Michael Sheriff, Chief Executive Officer
/s/ Michael Sheriff
Michael Sheriff, Chief Financial Officer
and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant in the
capacity on this 14th day of April, 1999.
/s/ Michael Sheriff
Michael Sheriff, Director
/s/ James Malone
James Malone, Director
/s/ R.J. Pipes
R.J. Pipes, Director
<PAGE>
EXHIBITS
TABLE OF CONTENTS
3.1 Preferred Stock Resolutions
10.1 Acquisition Agreement CyberQuest
10.2 Acquisition Agreement Reliance
Form 8 KSB dated November 19, 1998
Form 8 KSB/A dated November 19, 1998
Form 8 KSB/A dated November 19, 1998
<PAGE>
EXHIBIT No. 3.1 Preferred Stock Resolutions
SERIES A: REDEEMABLE PREFERRED STOCK
CERTIFICATE SETTING FORTH RESOLUTIONS
BY THE BOARD OF DIRECTORS FOR CBQ, INC.
(Pursuant to the Colorado Corporation Code)
We, the undersigned, as the President and Secretary of CBQ, Inc., a Colorado
corporation formerly known as Freedom Funding, Inc., the Articles of
Incorporation of which are on file in the office of the Secretary of State for
the State of Colorado DO EACH HEREBY CERTIFY AND VERIFY: that the Board of
Directors of CBQ, Inc., in accordance with said articles and pursuant to the
laws of the State of Colorado, duly adopted on November 19, 1998, the preambles
and resolutions attached hereto.
IN WITNESS WHEREOF: We have set our hands this 19th day of
November, 1998.
CBQ, INC.
By: /s/ James E. Malone
James E. Malone, President
Attest: /s/ William J. Flannery, III
William J. Flannery, III, Secretary
<PAGE>
UNANIMOUS CONSENT IN LIEU OF SPECIAL MEETING
BOARD OF DIRECTORS
FOR
CBQ, INC.
(November 19, 1998)
Pursuant to the provisions of the Colorado Corporation Code, which provide that
action required or permitted by said code to be taken at a meeting of the board
of directors of a corporation may be taken without a meeting with the same force
and effect as a unanimous vote of said board if the action is (I) evidenced by
one or more written consents describing the action taken, (ii) signed by each
director and (iii) delivered to the secretary of the corporation for filing with
the corporate records, the undersigned, being the sole member of the board of
directors of CBQ, Inc., a Colorado corporation formerly known as Freedom
Funding, Inc. (the Board of Directors and the Company, respectively), does
hereby waive any and all notice which may be
required to be given with respect to a meeting of the Board of Directors and
does hereby take, ratify, confirm and approve the following action this 19th day
of November, 1998.
WHEREAS, the Company has been presented with an opportunity to acquire as a
subsidiary CyberQuest, Inc., a Colorado corporation (CyberQuest); WHEREAS, the
Company has been presented with a proposed Plan and Agreement of Purchase
(CyberQuest Purchase Agreement) by and between the Company, CyberQuest and the
shareholders (Shareholders) of CyberQuest; WHEREAS, the CyberQuest Purchase
Agreement requires the delivery to the Shareholders of 18,000,000 shares of the
common stock of the Company and 70,000 shares of a series of preferred stock in
order to consummate said agreement; WHEREAS, the execution and delivery of, and
performance under, the CyberQuest Purchase Agreement and the delivery of the
common and preferred shares thereunder is in the best interests of the Company;
WHEREAS, the Articles of Incorporation governing the Company (Articles of
Incorporation) permit the issuance of preferred shares in series with such
designations, preferences and relative participating option or other rights and
qualifications, limitations and restrictions as may be fixed by the Board of
Directors, including, without limitation, the rate of dividends and redemption
and conversion prices, all of which are to be determined after giving
consideration to the financial and general condition of the Company and to the
condition of the securities' markets, if any, existing at the time of issuance;
and WHEREAS, the Board of Directors deems it advisable to establish and issue a
new series of preferred stock at this time to accomplish the consummation of the
CyberQuest Purchase Agreement and have carefully investigated the financial and
general condition of the Company and the relation of the condition of the
Company to the condition of the securities markets, and have determined that it
is in the best interests of the Company to establish a new series of preferred
stock to be denominated Series A: Redeemable Preferred Stock with the attributes
set forth in this resolution and to forthwith deliver a certificate evidencing
the same to the Shareholders:
<PAGE>
NOW, THEREFORE, BE IT RESOLVED that the Board of Directors authorizes Corporate
Stock Transfer to issue 18,000,000 restricted common shares of the Company to
the Shareholders in partial consummation of the CyberQuest Purchase Agreement;
RESOLVED that Mr. Mark S. Pierce shall instruct Corporate Stock Transfer in the
number and name of the Shareholders to whom the aforesaid shares shall be
issued; RESOLVED that the Board of Directors hereby authorizes the Company to
issue for the purpose of consummating the CyberQuest Purchase Agreement Seventy
Thousand (70,000) shares of its Series A: Redeemable Preferred Stock at a price
of $10 per share, which series shall have the following features: (a) Dividend
The series shall be paid no dividend. (b) Conversion The series shall not be
convertible into any other securities of the Company. (C) Redemption The Company
shall have an elective and cumulative redemption right as follows: (1) from and
after November 19, 1998, and up to and including November 18, 1999, the Company
may redeem, at any time and from time to time, all or any portion of up to 7,000
preferred shares at a price of $10 per share; (2) from and after November 19,
1999, and up to and including November 18, 2000, the Company may redeem, at any
time and from time to time, all or any portion of (y) the preferred shares not
redeemed under (1) and (z) up to an additional 14,000 preferred shares at a
price of $11.00 per share; (3) from and after November 19, 2000, and up to and
including November 18, 2001, the Company may redeem, at any time and from time
to time, all or any portion of (y) those preferred shares not redeemed under (1)
and (2) and (z) up to an additional 21,000 preferred shares at a price of $12.00
per share; and (4) from and after November 19, 2001, and up to and including
November 18, 2002, the Company may redeem, at any time and from time to time,
all or any portion of (y) those preferred shares not redeemed under (1), (2) and
(3) and (z) up to an additional 28,000 preferred shares at a price of $13.00 per
share however, in the event that the Company offers and sells its securities to
the public through an offering registered with the Securities and Exchange
Commission, the Company shall forthwith redeem the outstanding Preferred Stock
not previously redeemed at a price per share of $10.00 per share until November
18, 1999, $11.00 per share until November 18, 2000, $12.00 per share until
November 18, 2001 and $13.00 per share until and after November 18, 2002. (d)
Liquidation Preference the holders of the series shall not be entitled to a
liquidation preference over any existing or subsequently established class or
series of outstanding stock of the Company. (e) Sinking Fund The holders of this
series shall not be entitled to the establishment of any sinking fund for the
purpose or retiring the shares of the series or for any other purpose. (f)
Voting Rights The series shall have no voting rights other than those provided
under Colorado law. (g) Additional Provisions In the event that the Company
shall offer and sell on a private, non-registered basis at any time during which
any shares of Preferred Stock remain outstanding any share of common stock of
the Company at a price of less than $5.00 per share, the Company shall forthwith
grant to the holder(s) of any then outstanding shares of Preferred Stock a
warrant allowing said holder(s) to acquire from the Company one (1) share of
common stock for each ten shares of common stock issued and sold. The warrant
shall be exercisable for a period of one (1) year after grant at the price for
which the shares of common stock causing the imposition of this provision were
issued and sold.
<PAGE>
RESOLVED FURTHER that the following individuals are appointed to serve as
directors of the Company: Michael Sheriff, James E. Malone and R.J. Pipes; that
Mr. Sheriff shall serve as Chairman; and that the resignation of Mr. Mark S.
Pierce as a director of the Company is hereby accepted immediately as evidenced
by his signature below.
RESOLVED FURTHER that the following individuals are appointed to serve as
officers of the Company: Michael Sheriff Chief Executive Officer, James E.
Malone President and Treasurer and William J. Flannery, III Secretary; and that
the resignation of Mr. Mark S. Pierce from all positions as an officer of the
Company is hereby accepted immediately as evidenced by his signature below.
RESOLVED FURTHER that the President and Secretary are hereby authorized and
directed to cause to be filed under corporate seal such certificates as shall be
requisite to the end that the stock shall be issued and delivered to the
Shareholders as aforesaid; and
RESOLVED FINALLY that the President be, and he hereby is, authorized to (I)
effectuate, to the extent necessary and appropriate, those actions taken hereby,
(ii) issue a certificate or certificates for the shares, (iii) prepare a form of
certificate for the shares in accordance with the above resolutions and (iv)
provide for filing all necessary documentation with the Secretary of State for
the State of Colorado, applicable state securities authorities and the United
States Securities and Exchange Commission.
IN WITNESS WHEREOF, the undersigned, being the sole member of the Board of
Directors, has hereunto set his hand effective as of the date first specified
above.
/s/ Mark S. Pierce
Mark S. Pierce, Director
<PAGE>
EXHIBIT A
SERIES A: REDEEMABLE PREFERRED STOCK PROVISIONS
The Series A: Redeemable Preferred Stock (the Preferred Stock or the Series A
Preferred Stock) shall consist of one (1) series of Seventy Thousand (70,000)
shares of the preferred stock of CBQ, Inc., (Company), with each share to be
identical to every other in all respects. The following sets forth the
provisions of the Series A Preferred Stock.
Part 1: Dividends: The holders of the issued and outstanding Preferred Stock
shall not be entitled to receive dividends.
Part 2: Conversion: The holders of the Preferred Stock shall have no conversion
rights.
Part 3: Redemption: The Company shall have an elective and cumulative redemption
right as follows: (1) from and after November 19, 1998, and up to and including
November 18, 1999, the Company may redeem, at any time and from time to time,
all or any portion of up to 7,000 preferred shares at a price of $10 per share;
(2) from and after November 19, 1999, and up to and including November 18, 2000,
the Company may redeem, at any time and from time to time, all or any portion of
(y) the preferred shares not redeemed under (1) and (z) up to an additional
14,000 preferred shares at a price of $11.00 per share; (3) from and after
November 19, 2000, and up to and including November 18, 2001, the Company may
redeem, at any time and from time to time, all or any portion of (y) those
preferred shares not redeemed under (1) and (2) and (z) up to an additional
21,000 preferred shares at a price of $12.00 per share; (4) from and after
November 19, 2001, and up to and including November 18, 2002, the Company may
redeem, at any time and from time to time, all or any portion of (y) those
preferred shares not redeemed under (1), (2) and (3) and (z) up to an additional
28,000 preferred shares at a price of $13.00 per share. In the event that the
Company offers and sells its securities to the public through an offering
registered with the Securities and Exchange Commission, the Company shall
forthwith redeem the outstanding Preferred Stock not previously redeemed at a
price per share of $10.00 per share until November 18, 1999, $11.00 per share
until November 18, 2000, $12.00 per share until November 18, 2001 and $13.00 per
share until and after November 18, 2002.
<PAGE>
Part 4: Liquidation: The Preferred Stock shall not be entitled to preferential
liquidation rights over any other class or series of stock previously or which
may subsequently be issued by the Company.
Part 5: Sinking Fund: The Preferred Stock shall not be entitled to the
establishment of any sinking fund for any purpose.
Part 6: Voting Rights: The Preferred Stock shall have no voting rights.
Part 7: Additional Provisions: In the event that the Company shall offer and
sell at any time on a private, nonregistered basis during which any shares of
Preferred Stock remain outstanding any share of common stock of the Company at a
price of less than $5.00 per share, the Company shall forthwith grant to the
holder(s) of any then outstanding shares of Preferred Stock a warrant allowing
said holder(s) to acquire from the Company one (1) share of common stock for
each ten shares of common stock issued and sold. The warrant shall be
exercisable for a period of one (1) year after grant at the price for which the
shares of common stock causing the imposition of this provision were issued and
sold.
<PAGE>
Exhibit 10.1 Acquisition Agreement CyberQuest
AGREEMENT OF PURCHASE
This plan and agreement of purchase (Plan) has been adopted as a reorganization
under Section 368(b) of the Internal Revenue Code and has been entered into in
Dallas, Texas, this 19th day of November, 1998 (Closing Date), between Freedom
Funding, Inc., a Colorado corporation which has agreed to change its name to
CBQ, Inc., and which is sometimes referred to in this Agreement as either the
Purchaser or CBQ, CyberQuest, Inc., a Colorado corporation which is sometimes
referred to in this Agreement as either the Acquired Corporation or CyberQuest
and the shareholders of CyberQuest, all of whom are sometimes collectively
referred to in this Agreement as the Shareholders.
CBQ hereby acquires from the Shareholders all of issued and outstanding capital
stock of CyberQuest in exchange solely for shares of voting stock of CBQ. Under
this Plan, CyberQuest has become a subsidiary of CBQ.
ARTICLE I
EXCHANGE OF VOTING CAPITAL STOCK
1.01. Transfer and Delivery of CyberQuest Shares. Shareholders hereby transfer
and deliver to CBQ certificates evidencing all of the issued and outstanding
capital stock of CyberQuest duly endorsed in blank so as to effect transfer by
delivery.
1.02. Issuance and Delivery of CBQ Shares. In exchange for the transfer by
Shareholders to CBQ of all of the issued and outstanding CyberQuest capital
shares hereunder, CBQ will forthwith cause to be forthwith issued and delivered
to the Shareholders (I) 18,000,000 restricted common shares of CBQ
(collectively, the CBQ Shares), and (ii) 70,000 shares of Class A Preferred
Stock. The foregoing share numbers reflect a reverse one for four (1:4) capital
share split which CBQ shall forthwith implement and make effective. CBQ shall
also forthwith and make effective a change of name from Freedom Funding, Inc.,
to CBQ, Inc.
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS AND ACQUIRED
CORPORATION
2.01. Organization and Standing. CyberQuest is a corporation duly organized,
validly existing and in good standing under the laws of Colorado, with all
corporate powers necessary to own property and carry on its business as it is
now being conducted. Copies of the articles of incorporation and bylaws of
CyberQuest delivered to Purchaser herewith are complete and accurate as of the
Closing Date.
2.02. Balance Sheet. A balance sheet and related statements of operations, cash
flows and equity of CyberQuest dated as of and for the three year or lesser
period, if inception occurred within three years, ended December 31, 1997, shall
forthwith be delivered to CBQ. CyberQuest shall cause these financial statements
to be (a) audited in accordance with Generally Accepted Auditing Standards, (b)
prepared in accordance with Generally Accepted Accounting Principles applied on
a consistent basis fairly presenting the financial position of CyberQuest and
(C) prepared to as to comply with Regulation S X and the time periods set forth
in Form 8 KSB, that being within 75 days after the Closing Date. CyberQuest
shall also deliver to CBQ within the aforesaid 75 day period any other audited
and/or unaudited financial statements required under Regulation S X, Form 8 KSB
or otherwise by applicable securities laws. (The foregoing audited and unaudited
financial statements are collectively referred to herein as the Balance Sheet.)
2.03. Capitalization. CyberQuest has an outstanding capitalization which is all
in the hands of the Shareholders, all of which has been fully paid for and is
non assessable. There are no outstanding subscriptions, options, contracts,
commitments or demands relating to the capital stock of CyberQuest or any other
agreements of any character under which CyberQuest or the Shareholders would be
obligated to issue or purchase shares of CyberQuest capital stock.
2.04. Title to Assets. CyberQuest has good and marketable title to all of its
assets, all as set forth in the Balance Sheet, none of which are subject to any
mortgage, pledge, lien, charge, security interest, encumbrance or restriction
whatsoever except those that: (a) are disclosed on the Balance Sheet and/or the
footnotes thereto or (b) do not materially and adversely affect the use of the
asset. Further, the assets of CyberQuest are in good condition and repair.
<PAGE>
2.05. Schedule of Assets. CyberQuest shall forthwith deliver to Purchaser a
schedule of assets containing, as of the Closing Date, a true and complete: (a)
description of all software licensing and sublicensing agreements in favor of or
made by CyberQuest; (b) description of any real property in which CyberQuest has
a leasehold interest; (C) list of all capitalized equipment of CyberQuest that
sets forth any liens, claims, encumbrances, charges, restrictions, covenants and
conditions concerning the listed items; (d) list of all machinery, tools, and
equipment in which CyberQuest has a leasehold interest, with a description of
each interest; (e) list of all patents, patent licenses, trademarks, trademark
registrations, trade names, copyrights and copyright registrations owned by
CyberQuest; and (f) list of all interests in subsidiaries and/or joint ventures.
2.06. Liabilities. Except as set forth in the Balance Sheet, CyberQuest
presently has no outstanding indebtedness other than liabilities incurred in the
ordinary course of business. CyberQuest is not in default with respect to any
terms or conditions of any indebtedness. Further, CyberQuest has not made any
assignment for the benefit of creditors, nor has any involuntary or voluntary
petition in bankruptcy been filed by or against CyberQuest.
2.07. Litigation. CyberQuest is not a party to, nor has it been threatened with,
any litigation or governmental proceeding that, if decided adversely to it,
would have a material and adverse effect on its operations or business, or on
the financial condition, net worth, prospects or business of CyberQuest. To the
best of the CyberQuest's knowledge, it is not aware of any facts that might
result in any action, suit or other proceeding that would result in any material
and adverse change in the business or financial condition of CyberQuest.
2.08. Compliance with Law and Instruments. The business and operations of
CyberQuest are not infringing on or otherwise acting adversely to any
copyrights, trademark rights, patent rights or licenses owned by any other
person, and there is not any pending claim or threatened action with respect to
such rights. CyberQuest is not obligated to make any payments in the form of
royalties, fees or otherwise to any owner of any patent, trademark, trade name
or copyright.
2.09. Contractual Obligations. CyberQuest is not a party to or bound by any
written or oral: (a) contract not made in the ordinary course of business, (b)
bonus, pension, profit sharing, retirement, stock option, hospitalization, group
insurance or similar plan providing employee benefits other than in the ordinary
course of business, (C) any real or personal property lease other than in the
ordinary course of business or (d) deed of trust, mortgage, conditional sales
contract, security agreement, pledge agreement, trust receipt or any other
agreement subjecting any of the assets or properties of CyberQuest to a lien,
encumbrance. CyberQuest has performed all obligations required to be performed
by it under any of the contracts and leases to which it is a party as of the
Closing Date and is not in material default under any of the contracts, leases
or other arrangements by which it is bound. None of the parties with whom
CyberQuest has contractual arrangements are in default of their obligations.
<PAGE>
2.10. Changes in Compensation. Since the date of the Balance sheet, CyberQuest
has not granted any general pay increase to employees or changed the rate of
compensation, commission or bonus payable to any officer, employee, director,
agent or stockholder, other than in the normal course of business.
2.11. Records. All of the account books, minute books, stock certificate books
and stock transfer ledgers of CyberQuest are complete and accurate.
2.12. Authority. The execution and performance of this Agreement have been duly
authorized by all requisite corporate action. This Agreement constitutes a valid
and binding obligation of CyberQuest and the Shareholders in accordance with its
terms. No provision of the articles of incorporation, bylaws, minutes, share
certificates or contracts prevents CyberQuest and/or the Shareholders from
delivering the CyberQuest shares to CBQ in the manner contemplated under the
Plan.
2.13. Taxes. CyberQuest has filed all income tax returns and, in each
jurisdiction where qualified or incorporated, all income tax and franchise tax
returns that are required to be filed. CyberQuest has paid all taxes as shown on
the returns as have become due, and has paid all assessments received that have
become due.
2.14. Brokers. All negotiations on the part of CyberQuest and the Shareholders
related to the Plan have been accomplished solely by CyberQuest and the
Shareholders without the assistance of any person employed as a broker or
finder. CyberQuest and the Shareholders have done nothing to give rise to any
valid claims for a broker's commission, finder's fee or any similar charge.
2.15. Full Disclosure. As of the Closing Date, CyberQuest and the Shareholders
have disclosed all events, conditions and facts materially affecting the
business and prospects of CyberQuest. The Shareholders and CyberQuest have not
withheld knowledge of any event, condition or fact that they have reasonable
grounds to know may materially affect the business and prospects of CyberQuest.
None of the representations and warranties made by the Shareholders or
CyberQuest in this Agreement or in any instrument, writing or other document
furnished to CBQ contains any untrue statement of a material fact, or fails to
state a material fact.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.01. Organization and Standing. CBQ is a corporation duly organized, validly
existing and in good standing under the laws of Colorado, with all corporate
powers necessary to own property and carry on its business as it is now being
conducted. Copies of the articles of incorporation and bylaws of CBQ delivered
to the Shareholders and CyberQuest herewith are complete and accurate as of the
Closing Date.
3.02. Subsidiaries. CBQ has no subsidiaries.
3.03. Capitalization. CBQ has an authorized capitalization consisting of
500,000,000 common shares, $.0001 par value per share, and 100,000,000 preferred
shares, $.001 par value per share. As of the Closing Date, the number of common
shares outstanding is as set forth in the Form 10 QSB as of and for the nine
month period ended September 30, 1998, and, as of the Closing Date, no preferred
shares are issued and outstanding, all of which issued and outstanding common
shares are fully paid for and non assessable. There are no outstanding warrants,
options, contracts, calls, commitments or demands relating to the unissued
securities of CBQ.
3.04. Due Delivery. The CBQ Shares issued to the Shareholders have been validly
authorized and issued and are fully paid for and non assessable. No CBQ
shareholder has any preemptive right of subscription or purchase with respect to
these shares.
3.05. Authority. The execution and performance of this Agreement have been duly
authorized by all requisite corporate action. This Agreement constitutes a valid
and binding obligation of CBQ in accordance with its terms. No provision of the
articles of incorporation, bylaws, minutes, share certificates or contracts
prevents CBQ from delivering the CBQ shares in the manner contemplated under the
Plan.
3.06. Brokers. All negotiations on the part of CBQ related to the Plan have been
accomplished solely by CBQ without the assistance of any person employed as a
broker or finder. CBQ has done nothing to give rise to any valid claims for a
broker's commission, finder's fee or any similar charge.
<PAGE>
3.07. Full Disclosure. As of the Closing Date, CBQ has disclosed all events,
conditions and facts materially affecting the business and prospects of CBQ, and
CBQ has not withheld knowledge of any event, condition or fact that it has
reasonable grounds to know may materially affect the business and prospects of
CBQ. None of the representations and warranties made by CBQ in this Agreement or
in any instrument, writing or other document furnished to the Shareholders or
CyberQuest contains any untrue statement of a material fact, or fails to state a
material fact.
ARTICLE IV
SURVIVAL OF WARRANTIES AND WARRANTIES
4.01. Nature and Survival of Representations and Warranties. All statements of
fact contained in this Agreement or in any memorandum, certificate, letter,
document or other instrument delivered by or on behalf of any of the parties
hereto to any other party pursuant to this Agreement shall be deemed
representations and warranties made by the delivering party to the other parties
under this Agreement. The covenants, representations and warranties of the
parties shall survive the Closing Date for a period of one year, and then they
shall lapse and be of no further effect.
4.02. Expenses. The parties to this Agreement shall pay their own expenses
incurred hereunder and in regards of the transactions contemplated hereby,
including, but not limited to, all fees and expenses of their respective counsel
and accountants.
ARTICLE V
COMPLIANCE WITH SECURITIES LAWS
5.01. Acknowledgments of the Shareholders. The Shareholders acknowledge,
understand and agree that: (a) The certificates representing the CBQ Shares will
each bear a legend restricting transfer in accordance with the exemptions from
registration under the Securities Act of 1933, as amended, which CBQ has relied
upon in the issuance of the CBQ Shares. (b) The CBQ Shares have not been
registered under the Securities Act of 1933, as amended, or any applicable state
law (collectively, the Securities Act). (C) The CBQ Shares may not be sold,
offered for sale, transferred, pledged, hypothecated or otherwise disposed of
except in compliance with the Securities Act. (d) The legal consequences of the
foregoing mean that the Shareholders must bear the economic risk of the
investment in the CBQ Shares for the requisite period of time. (e) No federal or
state agency has made any finding or determination as to the fairness of an
investment in CBQ, or any recommendation or endorsement of this investment.
<PAGE>
5.02. Further Representations and Warranties of Shareholders. Shareholders each
individually represent and warrant to CBQ as follows: (a) I have the financial
ability to bear the economic risks of my investment, have adequate means of
providing for my current needs and personal contingencies, and have no need for
liquidity in this investment; and, further, I have evaluated the high risks of
investing in CBQ and have such knowledge and experience in financial and
business matters in general and in particular with respect to this type of
investment that I am capable of evaluating the merits and risks of an investment
in the CBQ Shares. (b) I have been given the opportunity to ask questions of and
receive answers from CBQ concerning the terms and conditions of this investment,
and to obtain additional information necessary to verify the accuracy of the
information I desired in order to evaluate my investment, and in evaluating the
suitability of this investment I have not relied upon any representation or
other information (whether oral or written), other than that furnished to me by
CBQ or its representatives; further, I have had the opportunity to discuss with
my professional, legal, tax and financial advisers the suitability of an
investment in the CBQ Shares for my particular tax and financial situation; and,
further, in making the decision to purchase the CBQ Shares, I have relied solely
upon independent investigations made by me or on my behalf. (C) I am acquiring
the CBQ Shares solely for my own personal account, for investment purposes only,
and am not purchasing with a view to, or for, the resale, distribution,
subdivision or fractionalization thereof.
ARTICLE VI
MISCELLANEOUS
6.01. Amendments. This Agreement may be amended or modified at any time, but
only by an instrument in writing executed by CyberQuest, CBQ and each of the
individual Shareholders.
6.02. Waiver. The Shareholders, CyberQuest and/or CBQ may, in writing, (a)
extend the time for performance of any of the obligations of any other party to
this Agreement, (b) waive any inaccuracies or misrepresentations contained in
this Agreement or in any document delivered pursuant to this Agreement by any
other party and/or (C) waive compliance with any of the covenants, or
performance of any obligations, contained in this Agreement by any other party.
<PAGE>
6.03. Assignment. (a) Neither this Agreement nor any right created hereby shall
be assignable by any party without the prior written consent of the other
parties, except by the laws of succession. (b) Except as limited by subparagraph
(a), this Agreement shall be binding on and inure to the benefit of the
respective successors and assigns of the parties. Nothing in this Agreement,
expressed or implied, is intended to confer upon any person, other than the
parties and their permitted successors and assigns, any rights or remedies under
this Agreement.
6.04. Notices. Any notice or other communication required or permitted by this
Agreement must be in writing and shall be deemed to be properly given when
delivered in person to an officer of the other party, or to the party
individually when deposited in the U.S. mails for transmittal by certified or
registered mail, postage prepaid, or when deposited with a public telegraph
company for transmittal, charges prepaid, or when delivered via facsimile;
provided, however, that the communication is addressed as follows: (a) in case
of CyberQuest and the Shareholders: 4851 Keller Springs Rd., Ste. 213, Dallas,
Texas 75248; FAX: (972) 732 1169; and (b) in case of CBQ: 1999 Broadway, Ste.
3235, Denver, CO 80202; FAX (303) 292 2882.
6.05. Headings. Paragraph and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
6.06. Entire Agreement. This Agreement contains the entire agreement between the
parties relating to the subject matter hereof. It may be executed in any number
of counterparts, but the aggregate of such counterparts constitute only one and
the same instrument.
6.07. Partial Invalidity. In the event that any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if it never contained any such invalid, illegal or unenforceable
provisions.
6.08. Controlling Law. The validity, interpretation and performance of this
Agreement shall be controlled by and construed under the laws of the State of
Texas.
6.09. Attorney's Fees. If any action at law or in equity, including any action
for declaratory relief, is brought to enforce or interpret the provisions of
this Agreement, the prevailing party shall be entitled to recover reasonable
attorney's fees from the other party. The attorney's fees may be ordered by the
court in the trial of any action described in this paragraph or may be enforced
in a separate action brought for determining attorney's fees.
<PAGE>
6.10. Specific Performance. The parties declare that it is impossible to measure
in money the damages that will accrue to a party or its successors as a result
of any other parties' failure to perform any of the obligations under this
Agreement; therefore, if a party or its successor institutes any action or
proceeding to enforce the provisions of this Agreement, any party opposing such
action or proceeding agrees that specific performance may be sought and obtained
for any breach of this Agreement.
Purchaser: Freedom Funding, Inc.:
By: /s/ Mark S. Pierce
Mark S. Pierce, President
Acquired Corporation: CyberQuest, Inc.:
By: /s/ Michael Sheriff
Michael Sheriff, CEO
Shareholders:
Industrial Parts and Supplies, Inc.
By: /s/ Anne DeuPree, President
Anne DeuPree, President
/s/ Cynthia Jared
Cynthia Jared
/s/ Lynn Elliott
Lynn Elliott
Midland, Inc.:
By: Mark S. Pierce
Mark S. Pierce, President
CyberQuest, Ltd.:
By: CyberQuest Management Group, L.L.C.
Its General Partner
By: R.J. Pipes
R.J. Pipes, Its Manager
Andrew Pierce, CO UGMA
By: /s/ Mark S. Pierce
Mark S. Pierce, CO UGMA
/s/ Michelle E. Kopp
Michelle E. Kopp
/s/ Lynn Elliott
Lynn Elliott
<PAGE>
Exhibit 10.2
Acquisition Agreement
Reliance Technologies
PLAN AND AGREEMENT OF PURCHASE
This plan and agreement of purchase (Plan) has been adopted as a reorganization
under Section 368(b) of the Internal Revenue Code and entered into in Dallas,
Texas, this fifth day of March, 1999, between CBQ, Inc., a Colorado corporation
referred to in this Agreement as either the Purchaser or CBQ, and Reliance
Technologies, Inc., a Texas corporation, and the shareholders of Reliance
Technologies, Inc., all of whom are sometimes collectively referred to in this
Agreement as the Shareholders.
CBQ will acquire (at the Closing) from the Shareholders 100% of the issued and
outstanding capital stock of Reliance Technologies, Inc. in exchange for shares
of voting stock of CBQ. Under this Plan, Reliance Technologies, Inc. will become
a subsidiary of CBQ.
ARTICLE I
EXCHANGE OF VOTING CAPITAL STOCK
1.01. Transfer and Delivery of Reliance Technologies, Inc. Shares. At the
closing Shareholders will transfer and deliver to CBQ certificates evidencing
100% of the issued and outstanding Capital stock of Reliance Technologies, Inc.
duly endorsed in blank so as to effect transfer by delivery.
1.02. Issuance and Delivery of CBQ Shares. In exchange for the transfer by
Shareholders to CBQ of 100% of the issued and outstanding Reliance Technologies,
Inc. capital shares hereunder, CBQ will forthwith cause to be issued and
delivered to the Shareholders 1,000,000 restricted common shares of CBQ
(Collectively, the CBQ Shares).
1.03. CBQ will establish at closing The Reliance Technology Stock Option Plan,
Exhibit 4 to this Agreement, and will contribute 100,000 shares to this
Incentive Stock Option Plan for key employees of Reliance Technologies, Inc.
<PAGE>
1.04. CBQ will fund or will have funded the Business Plan of Reliance
Technology, Inc., in the cumulative amount of $250,000, within twelve (12)
months of the Closing Date. Funded will mean that CBQ has arranged equity
financing from any source. It may involve equipment or services provided by
outside suppliers.
1.05. Right of Recission. Should CBQ not fund or arrange funding as described in
1.04 above, then Reliance Technologies, Inc. reserves the right to rescind this
Agreement in its entirety. If rescinded, all CBQ Shares issued in 1.02 above
shall be transferred and delivered to CBQ; the certificates duly endorsed in
blank so as to effect transfer by delivery. Any rights, including shares issued
from those rights, granted under the Reliance Technology Stock Option Plan in
1.03 above shall be immediately void and of no effect. In addition, all monies
funded under 1.04 above are due and payable to CBQ. This Right of Recission will
expire Midnight twelve (12) months from the Date of Closing.
1.04. Closing Date. The Closing Date will be March 15, 1999 at 10:00 AM at the
offices of CBQ in Dallas, Texas unless otherwise determined by Mutual agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS AND ACQUIRED
CORPORATION
2.01. Organization and Standing. Reliance Technologies, Inc. is a corporation
duly organized, validly existing and in good standing under the laws of Texas,
with all Corporate powers necessary to own property and carry on its business as
it is now being conducted. Copies of the articles of incorporation and bylaws of
Reliance Technologies, Inc. delivered to Purchaser herewith are complete and
accurate as of the Closing Date.
2.02. Balance Sheet. A balance sheet and related statements of operations, cash
flows and equity of Reliance Technologies, Inc. dated as of and for the three
year or lesser period, if inception occurred within three years, ended December
31, 1998, shall forthwith be delivered to CBQ. Reliance Technologies, Inc. shall
cause these financial statements to be (a) audited in accordance with Generally
Accepted Auditing Standards, (b) prepared in accordance with Generally Accepted
Accounting Principles applied on a consistent basis fairly presenting the
financial position of Reliance Technologies, Inc. and (c) prepared to as to
comply with Regulation S X and the time periods set forth in Form 8 KSB, that
being within 75 days after the Closing Date. Reliance Technologies, Inc. shall
also deliver to CBQ within the aforesaid 75 day period any other audited and/or
unaudited financial statements required under Regulation S X, Form 8 KSB or
otherwise by applicable securities laws. (The foregoing audited and unaudited
financial statements are collectively referred to herein as the Balance Sheet.)
<PAGE>
2.03. Capitalization. Reliance Technologies, Inc. has an outstanding
capitalization, which is all in the hands of the Shareholders, all of which has
been fully paid for and is non assessable. There are no outstanding
subscriptions, options, contracts, commitments or demands relating to the
capital stock of Reliance Technologies, Inc. or any other agreements of any
character under which Reliance Technologies, Inc. or the Shareholders would be
obligated to issue or purchase shares of Reliance Technologies, Inc. capital
stock, except as described and disclosed on Exhibit 1 to this Agreement.
2.04. Title to Assets. Reliance Technologies, Inc. has good and marketable title
to all of its assets, all as set forth in the Balance Sheet, none of which are
subject to any mortgage, pledge, lien, charge, security interest, encumbrance or
restriction whatsoever except those that: (a) are disclosed on the Balance Sheet
and/or the footnotes thereto or (b) do not materially and adversely affect the
value of the asset. Further, the assets of Reliance Technologies, Inc. are in
good condition and repair.
2.05. Schedule of Assets. Reliance Technologies, Inc. shall forthwith deliver to
Purchaser a schedule of assets containing, as of the Closing Date, a true and
complete: (a) description of all software licensing and sublicensing agreements
in favor of or made by Reliance Technologies, Inc.; (b) description of any real
property in which Reliance Technologies, Inc. has a leasehold interest; (c) list
of all capitalized equipment of Reliance Technologies, Inc. that sets forth any
liens, claims, encumbrances, charges, restrictions, covenants and conditions
concerning the listed items; (d) list of all machinery, tools, and equipment in
which Reliance Technologies, Inc. has a leasehold interest, with a description
of each interest; (e) list of all patents, patent licenses, trademarks,
trademark registrations, trade names, copyrights and copyright registrations
owned by Reliance Technologies, Inc.; and (f) list of all interests in
subsidiaries and/or joint ventures.
2.06. Liabilities. Except as set forth in the Balance Sheet, Reliance
Technologies, Inc. presently has no outstanding indebtedness other than
liabilities incurred in the ordinary course of business. Reliance Technologies,
Inc. is not in default with respect to any terms or conditions of any
indebtedness. Further, Reliance Technologies, Inc. has not made any assignment
for the benefit of creditors, nor has any involuntary or voluntary petition in
bankruptcy been filed by or against Reliance Technologies, Inc..
<PAGE>
2.07. Litigation. Reliance Technologies, Inc. is not a party to, nor has it been
threatened with, any litigation or governmental proceeding that, if decided
adversely to it, would have a material and adverse effect on its operations or
business, or on the financial condition, net worth, prospects or business of
Reliance Technologies, Inc. To the best of the Reliance Technologies, Inc.'s
knowledge, it is not aware of any facts that might result in any action, suit or
other proceeding that would result in any material and adverse change in the
business or financial condition of Reliance Technologies, Inc.
2.08. Compliance with Law and Instruments. The business and operations of
Reliance Technologies, Inc. are not infringing on or otherwise acting adversely
to any copyrights, trademark rights, patent rights or licenses owned by any
other person, and there is not any pending claim or threatened action with
respect to such rights. Reliance Technologies, Inc. is not obligated to make any
payments in the form of royalties, fees or otherwise to any owner of any patent,
trademark, trade name or copyright, except as set forth on Exhibit 2.
2.09. Contractual Obligations. Reliance Technologies, Inc. is not a party to or
bound by any written or oral: (a) contract not made in the ordinary course of
business, (b) bonus, pension, profit sharing, retirement, stock option,
hospitalization, group insurance or similar plan providing employee benefits
other than in the ordinary course of business, except as disclosed on Exhibit 3
to this Agreement, (c) any real or personal property lease other than in the
ordinary course of business or (d) deed of trust, mortgage, conditional sales
contract, security agreement, pledge agreement, trust receipt or any other
agreement subjecting any of the assets or properties of Reliance Technologies,
Inc. to a lien or encumbrance. Reliance Technologies, Inc. has performed all
obligations required to be performed by it under any of the contracts and leases
to which it is a party as of the Closing Date and is not in material breach
under any of the contracts, leases or other arrangements by which it is bound.
None of the parties with whom Reliance Technologies, Inc. has contractual
arrangements are in default of their obligations.
2.10. Changes in Compensation. Since the date of the Balance sheet, Reliance
Technologies, Inc. has not granted any general pay increase to employees or
changed the rate of compensation, commission or bonus payable to any officer,
employee, director, gent or stockholder, other than in the normal course of
business.
<PAGE>
2.11. Records. All of the account books, minute books, stock certificate books
and stock transfer ledgers of Reliance Technologies, Inc. are current and
accurate.
2.12. Authority. The execution and performance of this Agreement have been duly
authorized by all requisite corporate action. This Agreement constitutes a valid
and binding obligation of Reliance Technologies, Inc. and the Shareholders in
accordance with its terms. No provision of the articles of incorporation,
bylaws, minutes, share certificates or contracts prevents Reliance Technologies,
Inc. and/or the Shareholders from delivering the Reliance Technologies, Inc.
shares to CBQ in the manner contemplated under the Plan.
2.13. Taxes. Reliance Technologies, Inc. has filed all income tax returns and,
in each jurisdiction where qualified or incorporated, all income tax and
franchise tax returns that are required to be filed. Reliance Technologies, Inc.
has paid all taxes as shown on the returns as have become due, and has paid all
assessments received that have become due.
2.14. Brokers. All negotiations on the part of Reliance Technologies, Inc. and
the Shareholders related to the Plan have been accomplished solely by Reliance
Technologies, Inc. and the Shareholders without the assistance of any person
employed as a broker or finder. Reliance Technologies, Inc. and the Shareholders
have done nothing to give rise to any valid claims for a broker's commission,
finder's fee or any similar charge.
2.15. Full Disclosure. As of the Closing Date, Reliance Technologies, Inc. and
the Shareholders have disclosed all events, conditions and facts materially
affecting the business and prospects of Reliance Technologies, Inc. The
Shareholders and Reliance Technologies, Inc. have not withheld knowledge of any
event, condition or fact that they have reasonable grounds to know may
materially affect the business and prospects of Reliance Technologies, Inc. None
of the representations and warranties made by the Shareholders or Reliance
Technologies, Inc. in this Agreement or in any instrument, writing or other
document furnished to CBQ contains any untrue statement of a material fact, or
fails to state a material fact.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.01. Organization and Standing. CBQ is a corporation duly organized, validly
existing and in good standing under the laws of Colorado, with all corporate
powers necessary to own property and carry on its business as it is now being
conducted. Copies of the articles of incorporation and bylaws of CBQ delivered
to the Shareholders and Reliance Technologies, Inc. herewith are complete and
accurate as of the Closing Date.
<PAGE>
3.02. Subsidiaries. CBQ has subsidiaries.
3.03. Capitalization. CBQ has an authorized capitalization consisting of
500,000,000 common shares, $.0001 par value per share, and 100,000,000 preferred
shares, $.001 par value per share. As of the Closing Date, the number of common
shares and preferred shares outstanding is as set forth in the Form 8K A as of
February 2, 1999; all of which issued and outstanding shares are fully paid for
and non assessable. CBQ has granted and registered 280,000 S 8 options; and
granted, subject to vesting, 300,000 options to outside parties at an option
price of closing market bid price or greater.
3.04. Due Delivery. The CBQ Shares issued to the Shareholders have been validly
authorized and issued and are fully paid for and non assessable. No CBQ
shareholder has any preemptive right of subscription or purchase with respect to
these shares.
3.05. Authority. The execution and performance of this Agreement have been duly
authorized by all requisite corporate action. This Agreement constitutes a valid
and binding obligation of CBQ in accordance with its terms. No provision of the
articles of incorporation, bylaws, minutes, share certificates or contracts
prevents CBQ from delivering the CBQ shares in the manner contemplated under the
Plan.
3.06. Brokers. All negotiations on the part of CBQ related to the Plan have been
accomplished solely by CBQ without the assistance of any person employed as a
broker or finder. CBQ has done nothing to give rise to any valid claims for a
broker's commission, finder's fee or any similar charge.
3.07. Full Disclosure. As of the Closing Date, CBQ has disclosed all events,
conditions and facts materially affecting the business and prospects of CBQ, and
CBQ has not withheld knowledge of any event condition or fact that it has
reasonable grounds to know may materially affect the business and prospects of
CBQ. None of the representations and warranties made by CBQ in this Agreement or
in any instrument, writing or other document furnished to the Shareholders or
Reliance Technologies, Inc. contains any untrue statement of a material fact, or
fails to state a material fact.
<PAGE>
ARTICLE IV
SURVIVAL OF WARRANTIES AND WARRANTIES
4.01. Nature and Survival of Representations and Warranties. All statements of
fact contained in this Agreement or in any memorandum, certificate, letter,
document or other instrument delivered by or on behalf of any of the parties
hereto to any other party pursuant to this Agreement shall be deemed
representations and warranties made by the delivering party to the other parties
under this Agreement. The covenants, representations and warranties of the
parties shall survive the Closing Date for a period of one year, and then they
shall lapse and be of no further effect.
4.02. Expenses. The parties to this Agreement shall pay their own expenses
incurred hereunder and in regards of the transactions contemplated hereby,
including, but not limited to, all fees and expenses of their respective counsel
and accountants.
ARTICLE V
COMPLIANCE WITH SECURITIES LAWS
5.01. Acknowledgments of the Shareholders. The Shareholders acknowledge,
understand and agree that: (a) The certificates representing the CBQ Shares will
each bear a legend restricting transfer in accordance with the exemptions from
registration under the Securities Act of 1933, as amended, which CBQ has relied
upon in the issuance of the CBQ Shares. (b) The CBQ Shares have not been
registered under the Securities Act of 1933, as amended, or any applicable state
law (collectively, the Securities Act). (C) The CBQ Shares may not be sold,
offered for sale, transferred, pledged, hypothecated or otherwise disposed of
except in compliance with the Securities Act of 1933 or 1934. (d) The legal
consequences of the foregoing mean that the Shareholders must bear the economic
risk of the investment in the CBQ Shares for the requisite period of time. (e)
No federal or state agency has made any finding or determination as to the
fairness of an investment in CBQ, or any recommendation or endorsement of this
investment.
5.02. Further Representations and Warranties of Shareholders. Shareholders each
individually represent and warrant to CBQ as follows: (a) I have the financial
ability to bear the economic risks of my investment, have adequate means of
providing for my current needs and personal contingencies, and have no need for
liquidity in this investment; and, further, I have evaluated the high risks of
investing in CBQ and have such knowledge and experience in financial and
business matters in general and in particular with respect to this type of
investment that I am capable of evaluating the merits and risks of an investment
in the CBQ Shares. (b) I have been given the opportunity to ask questions of and
receive answers from CBQ concerning the terms and conditions of this investment,
and to obtain additional information necessary to verify the accuracy of the
information I desired in order to evaluate my investment, and in evaluating the
suitability of this investment I have not relied upon any representation or
other information (whether oral or written), other than that furnished to me by
CBQ or its representatives; further, I have had the opportunity to discuss with
my professional, legal, tax and financial advisers the suitability of an
investment in the CBQ Shares for my particular tax and financial situation; and,
further, in making the decision to purchase the CBQ Shares, I have relied solely
upon independent investigations made by me or on my behalf. (C) I am acquiring
the CBQ Shares solely for my own personal account, for investment purposes only,
and am not purchasing with a view to, or for, the resale, distribution,
subdivision or fractionalization thereof.
<PAGE>
ARTICLE VI
MISCELLANEOUS
6.01. Amendments. This Agreement may be amended or modified at any time, but
only by an instrument in writing executed by Reliance Technologies, Inc., CBQ
and each of the individual Shareholders.
6.02. Waiver. The Shareholders of Reliance Technologies, Inc. and/or CBQ may, in
writing, (a) extend the time for performance of any of the obligations of any
other party to this Agreement, (b) waive any inaccuracies or misrepresentations
contained in this Agreement or in any document delivered pursuant to this
Agreement by any other party and/or (C) waive compliance with any of the
covenants, or performance of any obligations, contained in this Agreement by any
other party.
6.03. Assignment. (a) Neither this Agreement nor any right created hereby shall
be assignable by any party without the prior written consent of the other
parties, except by the laws of succession. (b) This Agreement shall be binding
on and inure to the benefit of the respective successors and assigns of the
parties. Nothing in this Agreement, expressed or implied, is intended to confer
upon any person, other than the parties and their permitted successors and
assigns, any rights or remedies under this Agreement.
6.04. Notices. Any notice or other communication required or permitted by this
Agreement must be in writing and shall be deemed to be properly given when
delivered in person to an officer of the other party, or to the party
individually when deposited in the U.S. Mails for transmittal by certified or
registered mail, postage prepaid, or when deposited with a public telegraph
company for transmittal, charges prepaid, or when delivered via facsimile;
provided, however, that the communication is addressed as follows:
in case of Reliance Technologies, Inc. and the Shareholders:
4851 Keller Spring Road
Suite 228
Addison, TX 75001; (972) 381 1353; and
in case of CBQ:
4851 Keller Springs Rd.
Suite. 213
Addison, Texas 75001; (972) 732 1100
<PAGE>
6.05. Headings. Paragraph and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
6.06. Entire Agreement. This Agreement contains the entire agreement between the
parties relating to the subject matter hereof. It may be executed in any number
of counterparts, but the aggregate of such counterparts constitute only one and
the same instrument.
6.07. Partial Invalidity. In the event that any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if it never contained any such invalid, illegal or unenforceable
provisions.
6.08. Controlling Law. The validity, interpretation and performance of this
Agreement shall be controlled by and construed under the laws of the State of
Texas, and venue for any lawsuit shall be in Dallas County, Texas.
6.09. Attorney's Fees. If any action at law or in equity, including any action
for declaratory relief, is brought to enforce or interpret the provisions of
this Agreement, the prevailing party shall be entitled to recover reasonable
attorney's fees from the other party. The attorney's fees may be ordered by the
court in the trial of any action described in this paragraph or may be enforced
in a separate action brought for determining attorney's fees.
6.10. Specific Performance. The parties declare that it is impossible to measure
in money the damages that will accrue to a party or its successors as a result
of any other parties' failure to perform any of the obligations under this
Agreement; therefore, if a party or its successor institutes any action or
proceeding to enforce the provisions of this Agreement, any party opposing such
action or proceeding agrees that specific performance may be sought and obtained
for any breach of this Agreement.
<PAGE>
6.11. Arbitration. Any dispute relating to the interpretation or performance of
this Agreement shall be resolved at the request of either party through binding
arbitration. Arbitration shall be conducted in Dallas, Texas in accordance with
the then existing rules of the American Arbitration Association. Judgment upon
any award by the arbitrators may be entered by any state or federal court having
jurisdiction. It is the intent of the parties to this Agreement that to
arbitrate be irrevocable.
Purchaser: CBQ, Inc.:
By: /s/ Michael L. Sheriff
Michael L. Sheriff, CEO
Acquired Corporation: Reliance Technologies, Inc.
By: /s/ Authorized Representative
Name:
Title:
Shareholders or Shareholder Agent:
By: /s/ Authorized Rep. By: /s/ Authorized Rep.
Shareholder Shareholder
By: /s/ Authorized Rep. By: /s/ Authorized Rep.
<PAGE>
Exhibit 1
Subscriptions, Options, Contracts, Commitments or Demands relating to the
Capital Stock of Reliance Technologies, Inc.
Acquired Corporation: Reliance Technologies, Inc.
By: /s/ Authorized Rep.
Exhibit 2
Payments in the form of Royalties, Fees or otherwise to any owner of any Patent,
Trademark, Trade Name or Copyright
Acquired Corporation: Reliance Technologies, Inc.
By: /s/ Authorized Rep.
EXHIBIT 3
Bonus, Pension, Profit Sharing, Retirement, Stock Option Plans
Acquired Corporation: Reliance Technologies, Inc.
By: /s/ Authorized Rep.
<PAGE>
Exhibit 4
The Reliance Technology Stock Option Plan
Memorandum
To: (Name of Employee)
From: Reliance Technologies, Inc., subsidiary of CBQ, Inc.
Date: (Month, Day, Year)
Subject: Incentive Stock Option Plan and Agreement
I am pleased to inform you that the Board of Directors of CBQ, Inc., through its
Executive Committee, has granted to you certain incentive stock options under
CBQ Inc.'s Reliance Technology 1999 Incentive Stock Option Plan (the Plan),
subject to your execution and return of both copies of the enclosed Stock Option
Agreement (the Option Agreement).
A total of 100,000 shares of common stock of CBQ, Inc. (the Company) have been
reserved for issuance under the Plan to key employee's of the Company. The
Company is authorized to issue 500,000,000 shares of common stock.
The options granted to you are to purchase shares of the Company's common stock
at the price of $ per share. The date of grant of these options is the date of
this notice, and it is the determination of the Executive Committee that on this
date the fair market value of the Company's common stock is $ per share.
Beginning 13 months from the date of this notice, the options will vest at a
rate of one fifth (1/5) per year and will be fully vested five years from the
date of this notice.
Enclosed is a copy of the Plan and two copies of the Option Agreement. These
documents govern the options granted to you, and you are advised to carefully
review all the provisions of both documents. After you have reviewed the
documents, you may speak with Michael Sheriff, the Company's CEO or Greg Allen,
President of RelianceTechnologies, Inc., to discuss any questions or comments
you may have. If the Plan and the Option Agreement are in order, please sign
both copies of the Option Agreement and return them to the Company. The Company
will then sign both copies and return one fully executed copy to you for your
records.
Your options are in all respects limited and conditioned as provided in the Plan
and the Option Agreement. At the time or times when you wish to exercise your
options, in whole or in part, please refer to the provisions of the Plan and the
Option Agreement dealing with methods and formalities of exercise of your
options.
Ten of the most frequently asked questions regarding Incentive Stock Option
Plans are asked and answered below:
1. What is an incentive stock option? An incentive stock option ("ISO") is the
grant by a corporation to an employee of a right to purchase shares of the
corporation's stock over a period of time at a price that is fixed at the time
the ISO is granted.
2. Who may be granted an ISO? Only an employee of the Company or certain related
companies may be granted an ISO.
3. How is the purchase price of an ISO determined? The purchase price of an ISO
is the fair market value of a share of the Company's stock at the time the ISO
is granted. Because the Company is a closely held corporation with no resale
market for its shares, determination of fair market value will be made by the
Company's Board of Directors. Whatever the fair market value is at the time the
ISO is granted will be the purchase price for all shares subject to the ISO over
the entire period during which the employee may exercise the ISO.
<PAGE>
4. What are the benefits of an ISO? An ISO gives an employee the opportunity to
share in the appreciation in the value of the Company's stock. For example,
assume that the Company grants an ISO to an employee on July 1, 1995 to purchase
1000 shares of its common stock over a period of five years in annual
installments of 200 shares per year beginning on July 1, 1996. If at the time of
the grant the fair market value of the Company's stock is $10 per share, and at
the end of year one the fair market value of the Company's stock is $20 per
share, the employee would purchase stock worth $4,000 for $2,000 under the Plan.
5. What are the tax consequences of an ISO? An employee does not recognize
taxable income at the time the ISO is granted to him. Neither does he recognize
taxable income at the time the ISO is exercised, unless he fails to hold the
shares purchased pursuant to the ISO for the statutorily prescribed ISO holding
period, that is the later of two years from the date the ISO is granted or one
year from the date that the shares are transferred to the employee. Provided
that the employee holds the shares for the minimum holding period, he generally
will only recognize taxable income upon the sale of the stock, that will be
based on the difference between his basis (the price he paid for the stock) and
his sale price. This amount will be taxed as capital gains income.
6. How is an ISO exercised? Each employee who is granted an ISO will receive a
copy of the Plan and must sign a Stock Option Agreement ("Option Agreement").
The Plan contains the general terms and conditions governing the grant and
exercise of ISOs, while the Option Agreement will govern the specifics of each
employee's ISOs, including the vesting schedule. Under the Plan and the Option
Agreement an employee who elects to exercise his vested ISOs must notify the
Company in writing of his election, specify the number of shares he wishes to
purchase, sign and submit to the Company an Investor Representation Letter (a
copy of which is attached to each Option Agreement) and pay the entire purchase
price for the shares with respect to which the ISOs are being exercised.
7. What if an ISO is not exercised at the time it vests? Each employee's Option
Agreement will contain a vesting schedule that specifies: (1) the period of time
over which the ISOs vest; (2) the number of shares with respect to which the
ISOs vest each year; (3) the time in which the employee must elect to exercise
those ISOs that have vested; and (4) whether or not vested but unexercised ISOs
may be exercised by the employee at a later date. It is the Company's present
intention to require employees to exercise vested ISOs within three months after
they vest.
<PAGE>
8. What if an employee's employment is terminated or if he dies or becomes
disabled? If an employee's employment with the Company is terminated, he may at
any time within one month after such termination exercise only those ISO's that
he could have exercised as of his last day of employment. If any employee's
employment is terminated because of death or disability, the one month period is
extended to six months.
9. May an ISO be transferred by an employee to someone else? It is the Company
present intention to prohibit any transfer other than a transfer to a deceased
employee's estate or heirs upon his death, in that case the estate or heirs
would have six months after the employee's death to exercise those ISO's that he
could have exercised as of his date of death.
10. Will all Option Agreements be identical? No.
Incentive Stock Option Plan Agreement
Incentive Stock Option Plan of Reliance
Technologies, Inc., a Wholly owned Subsidiary of CBQ, Inc.
Adopted as of (Month, Day, Year)
1. Purpose of the Plan. The purpose of the Reliance Technology 1999 Incentive
Stock Option Plan (the Plan) is to encourage and enable selected employees of
Reliance Technologies, Inc., a subsidiary corporation (the Subsidiary), to
acquire or expand a proprietary interest in CBQ, Inc., the parent corporation
(the Company). Subsidiary corporation and parent corporation are those terms as
defined in Section 424 of the Internal Revenue Code of 1986, as amended (the
Code). To accomplish this objective, the Plan provides a means whereby eligible
employees may receive stock options that qualify as "incentive stock options"
under Section 422A of the Internal Revenue Code as added by the Economic
Recovery Tax Act of 1981 and as it may be amended from time to time (Section
422A).
2. Eligible Employees. Key employees, including officers and directors who are
employees of the Subsidiary are eligible to receive an option or options under
the Plan.
3. Stock Subject to the Plan. An aggregate of 100,000 authorized but unissued,
or treasury, shares of the common stock of the Company, or such number and class
of securities as adjusted to give effect to the anti dilution provisions
contained in Paragraph 6.2 hereof, may be sold upon the exercise of options
granted under the Plan. In the event that any option outstanding under the Plan
expires, or is terminated for any reason, unexercised in whole or in part, prior
to the end of the period during which options may be granted under the Plan, the
shares of stock allocable to the unexercised portion of such option may again be
subjected to option under the Plan.
<PAGE>
4. Administration. The Plan shall be administered by the Executive Committee
(the "Committee") appointed by the Board of Directors of the Company. The
Committee shall consist of one (1) officer or director from the Company and two
(2) officers or directors from the Subsidiary. Subject to the general purposes,
terms and conditions of the Plan, the Committee shall have full power to
implement and carry out the Plan in all ways permissible under the applicable
provisions of the Code, including, but not limited to, the following: (1) to
construe and interpret the Plan; (2) to prescribe, amend and rescind rules and
regulations relating to the Plan; and (3) to make all other determinations
necessary or advisable for the administration of the Plan. The Committee shall
determine which employees should be granted options under the Plan, the number
of shares of stock covered by each option, and the terms and conditions of each
option.
5. Granting of Options. Options shall be granted within 10 years from the
effective date of the Plan. Each option shall be evidenced by a written Stock
Option Agreement executed by the Company and the employee to whom such option is
granted. An option shall be deemed to have been granted only when the Stock
Option Agreement has been duly executed by the Company and the employee to whom
such option is granted has been notified of the granting of the option.
6. Terms and Conditions of Options. Each option shall be subject to the
following terms and conditions:
6.1 Option Price. The option price, that shall be approved by the Committee,
shall be determined in accordance with the applicable provisions of the Code and
shall in no event be less than the fair market value of the Company's common
stock at the time the option is granted. If an employee owns more than 10% of
the outstanding stock of the Company, the option price shall be at least 110% of
the fair market value of the stock. The fair market value for the purposes of
the Plan shall be determined by the Committee in accordance with reasonable
criteria that do not conflict with the applicable provisions of the Code.
6.2 Adjustments. In the event that the common stock of the Company is changed by
reason of any stock split, reverse stock split, recapitalization, or other
change in the capital structure of the Company, or converted into or exchanged
for other securities as a result of any merger, consolidation or reorganization,
or in the event that the outstanding number of shares of common stock of the
Company is increased through payment of a stock dividend, appropriate
proportionate adjustments shall be made in the number and class of shares of
stock subject to the Plan, and the number and class of shares of stock subject
to any option outstanding under the Plan; provided, however, that the Company
shall not be required to issue fractional shares as a result of any such
adjustment. Any such adjustment shall be made by the Committee, whose
determination shall be conclusive. If there is any other change in the number or
kind of the outstanding shares of common stock of the Company, or of any other
security into which such stock shall have been changed or for which it shall
have been exchanged, and if the Committee, in its sole discretion, determines
that such change equitably requires any adjustment in the options then
outstanding under the Plan, such adjustment shall be made in accordance with the
determination of the Committee. No adjustments shall be required by reason of
the issuance or sale by the Company for cash or other consideration of
additional shares of its common stock or securities convertible into or
exchangeable for shares of its common stock. All adjustments shall be made in
such a manner that each option which is adjusted will continue to qualify under
Section 422A as an incentive stock option.
<PAGE>
6.3 Other Rights in Event of Certain Reorganizations. New option rights may be
substituted for the option rights granted under the Plan, or the Company's
duties as to options outstanding under the Plan may be assumed, by an employer
corporation other than the Company, or by a parent or subsidiary of such
employer corporation, in connection with any merger, consolidation, acquisition,
separation, reorganization, liquidation or like occurrence in which the Company
is involved, in such a manner that will allow the then outstanding options to
continue to qualify as incentive stock options under Section 422A and to the
full extent permitted thereby. Despite the foregoing provisions of this Section
6(3), in the event such employer corporation, or parent or subsidiary of such
employer corporation, refuses to substitute new option rights for, and
substantially equivalent to, the option rights granted under this Agreement, or
to assume the option rights granted under this Agreement, as permitted by the
Code, the option rights granted under this Agreement shall terminate and
thereupon become null and void: (1) upon the reorganization, dissolution or
liquidation of the Company, or similar occurrence; or (2) upon any merger,
consolidation, acquisition or separation, or similar occurrence, if the Company
is not the surviving corporation; provided, however, that each optionee shall
have the right, immediately prior to or concurrently with such reorganization,
dissolution, liquidation, merger, consolidation, acquisition, separation, or
similar occurrence, and upon at least 10 days' written notice thereof, to
exercise any unexpired option rights granted hereunder to the extent such option
rights are exercisable at the time of mailing of such notice, but in any event
subject to the time limitations for exercise of options provided in the Code.
<PAGE>
In the event that the Committee, in its sole discretion, determines that it is
desirable to offer its shares to the public pursuant to a registration statement
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended, or pursuant to an exemption under such Act, the Secretary of
the Company shall notify all optionees affected of such determination in
writing. In that event, all outstanding options shall become null and void 30
days after such notice is mailed, but each affected optionee shall, during such
30 day period, have the right to exercise any unexpired option rights granted
under this Agreement to the extent such option rights are exercisable at the
time of mailing of such notice, but in any event subject to the time limitations
for exercise of options provided in the Code.
6.4 Option Exercise Period. Each option granted under the Plan shall become
exercisable on a date or in installments, and shall expire on a date, determined
by the Committee, but in no event shall an option expire later than 10 years
from the date such option is granted, and in the case of an employee who owns
more than 10% of the outstanding stock of the Company, in no event shall an
option expire later than five (5) years from the date such option is granted.
6.5 Nonassignability of Option Rights. No option granted under the Plan shall be
assignable or otherwise transferable by the optionee except by will or by the
laws of descent and distribution. During the life of an optionee, his or her
option shall be exercisable only by him or her.
6.6 Other Provisions. Each option granted under the Plan may contain such other
terms, provisions, and conditions not inconsistent with the Plan as may be
determined by the Committee, and shall include such provisions and conditions as
are necessary to qualify the option under Section 422A as an incentive stock
option.
7. Amendment, Suspension, or Termination of the Plan. The Committee may at any
time amend, suspend, or terminate the Plan. However, the Committee may not,
without approval of the holders of a majority of the combined issued and
outstanding voting shares of the Company, increase the aggregate number of
shares of stock subject to the Plan (except as provided in Section 6.2 of this
Agreement), and neither the amendment, suspension, nor termination of the Plan
shall, without the consent of the optionee, alter or impair any rights or
obligations under any option granted under the Plan (except as provided in
Section 6.2 or Section 6.3 in this Agreement). No option may be granted during
any period of suspension or after termination of the Plan.
<PAGE>
8. Action by Executive Committee. Any and all action authorized or required
under Sections 1 through 7 of the Plan to be taken by the Committee may be taken
by the Executive Committee of the Board of Directors of the Company if there be
one and if the Board of Directors of the Company has duly delegated its
authority to the Executive Committee to take such action.
9. Limit on Stock Subject to Options. Options shall not be granted to any
individual pursuant to this Plan, the effect of which would be to permit such
person to first exercise options, in any calendar year, for the purchase of
shares having a fair market value in excess of ($500,000) (determined at the
time of the grant of the options).
10. Non Exclusivity of Plan. Neither the adoption of the Plan by the Board of
Directors of the Company, the submission of the Plan to the shareholders of the
Company for their approval, nor any provision of the Plan shall be construed as
creating any limitation on the power of the Board of Directors of the Company to
adopt additional compensation arrangements from time to time as it may deem
desirable, including, without limitation, the granting of stock options and
bonuses otherwise than under the Plan, and such arrangements may be either
generally applicable or applicable only in specific cases.
11. Effective Date of the Plan. The effective date of this Plan is . On this
date the approval of both the shareholders and the Committee of directors of the
Company was duly obtained. Options may be granted and exercised under the Plan
only after there has been compliance with all applicable federal and state
securities laws.
Stock Option Agreement
Options granted under the Reliance Technology 1999 Incentive Stock Option Plan.
This Stock Option Agreement (Agreement) is entered into as of _____________
between _________________ , a Texas Resident, residing at ___________________
(Employee) and CBQ, Inc., a Colorado Corporation with its principal place of
business at 4851 Keller Springs Road, Suite 213, Addison, TX 75001 (Company).
General
<PAGE>
On ______________ , the Company adopted an incentive stock option plan
designated as the Reliance Technology 1999 Incentive Stock Option Plan (the
Plan), pursuant to the options that qualify as "incentive stock options" under
Section 422A of the Internal Revenue Code (the Code) as added by the Economic
Recovery Act of 1981 and as it may be amended from time to time (Section 422A)
may be granted to selected key employees of the Company or any of its
affiliates.
On the date of this Agreement the Employee is a bona fide employee of the
Company or one of its affiliates, as defined in the Plan.
The Executive Committee (the Committee) regards the Employee as a key employee,
as contemplated by the Plan, has determined that it would be to the advantage
and interest of the Company and its shareholders to grant to the Employee the
option rights provided for within this Agreement as an inducement to remain in
the service of the Company and as an incentive for increased efforts during such
service, and has instructed the Company's officers to issue such option rights
as provided in the Plan.
The Executive Committee has approved of the granting to the Employee of the
option rights evidenced by this Agreement.
In consideration for the mutual promises, covenants, and Agreements made below,
the parties, intending to be legally bound, agree as follows:
Agreement
1. Grant of Option Rights. Subject to the Employee's continued employment, as
provided in this Agreement, the Company hereby grants to the Employee the option
rights specified below (the "Option Rights"):
1.1 The number of shares of the Company's stock that are subject to the Option
Rights is shares of the Company's common stock (the Shares).
1.2 The option exercise price, which is not less than the fair market value of
the Shares as of the date hereof, and in the case of an Employee who owns 10% or
more of the Company's stock, not less than 110% of the fair market value of the
Shares as of the date of this Agreement, is $ per Share.
1.3 The Option Rights may be exercised during the time periods, and as to the
number of Shares with respect to when the Option is exercisable during each such
time period, as follows:
<PAGE>
1.3.1 Option Rights for up to 20% of the Shares may be exercised at any time or
times, from and including the date that is 12 months from the date hereof to and
including the Expiration Date;
1.3.2 Option Rights for up to an additional 20% of the Shares may be exercised
at any time or times, from and including the date that is 24 months from the
date of this Agreement to and including the Expiration Date;
1.3.3 Option Rights for up to an additional 20% of the Shares, may be exercised
at any time or times, from and including the date that is 36 months from the
date of this Agreement to including the Expiration Date;
1.3.4 Option Rights for up to an additional 20% of the Shares, may be exercised
at any time or times, from and including the date that is 48 months from the
date of this Agreement to including the Expiration Date; and
1.3.5 Option Rights for up to an additional 20% of the Shares, may be exercised
at any time or times, from and including the date that is 60 months from the
date of this Agreement to including the Expiration Date.
1.4 The minimum number of Shares with respect to which the Option Rights may be
exercised is the lesser of 20 Shares or the total number of Shares with respect
to when the Option Rights may be exercised during any given time period.
1.5 To exercise any of the Option Rights, the Employee must have remained in the
employ of the Company or one of its affiliates continuously through the exercise
date, except as otherwise provided in Section 3 below. The granting of the
Option Rights shall impose no obligation on the Company or any of its affiliates
to continue the employment of the Employee, and shall not lessen or affect the
right of the Company or any affiliate that employs the Employee to terminate
such employment or to change the duties, compensation, or other terms of
employment of the Employee. Any Option Rights that are not exercised on or
before the Expiration Date (as defined in Section 3 below) shall automatically
terminate and become null and void.
2. Fractional Shares; Compliance with Laws. In no event shall the Company be
required to issue fractional shares upon the exercise of any Option Rights
granted under this Agreement. No Option Rights may be exercised, and the Company
shall not be required to issue or deliver any certificate(s) for any of the
Shares until there has been compliance with all then applicable requirements of
law, including such registration or other proceedings under federal and state
securities laws as may in the Company's opinion be necessary or appropriate.
<PAGE>
3. Necessity of Employment When Option is Exercised. The Option Rights, to the
extent they have not expired or been exercised, shall terminate and become null
and void on the date that the Employee ceases, for any reason, to be an employee
of the Company or one of its affiliates, and shall not be exercisable on or
after such date, except that:
3.1 In the event of the termination of such employment for any reason other than
the death or disability of the Employee, the Employee may, at any time within a
period of one month after such termination of employment, exercise any or all of
the Option Rights to the extent the Option Rights were exercisable under the
provisions of Section 1 in this Agreement on the date of the termination of such
employment.
3.2 In the event of the death of disability of the Employee while in the employ
of the Company, the Employee, the personal representatives of the Employee or
any person or persons who acquired any such Option Rights from the Employee by
will or the applicable laws of descent and distribution may, at any time within
a period of three months after the death or disability of the Employee, exercise
any or all of the Option Rights to the extent the Option Rights were exercisable
under the provisions of Section 1 within this Agreement on the date of the death
or disability of the Employee.
In no event may any Option Rights be exercised by any person or entity after the
date immediately preceding the 10th anniversary date of this Agreement, or the
date on which the Option Rights terminate pursuant to this Section 3 or any
other provision of this Agreement. Each such date is referred to in this
Agreement as the Expiration Date. References throughout this Agreement to the
Employee shall be deemed, where appropriate, to include any person entitled to
exercise the Option Rights after the death of the Employee under the terms of
Section 3.1 or Section 3.2.
4. Nonassignability of Option Rights. The Option Rights: (1) shall, except as
provided in Section 3 of this Agreement, be exercisable only by the Employee;
(2) shall not be transferred, assigned, pledged or hypothecated in any manner
whatsoever, whether voluntarily, involuntarily or by operation of law; and (3)
shall not be subject to execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate, or otherwise dispose of the
Option Rights contrary to the provisions of this Agreement, the Option Rights
shall immediately become null and void.
<PAGE>
5. Adjustments. Appropriate proportionate adjustments shall be made by the
Company in the number and class of Shares subject to the Option Rights and the
exercise price of the Option Rights in the event that: (1) the common stock of
the Company is changed by reason of any stock split, reverse stock split,
recapitalization, or other change in the capital structure of the Company, or
converted into or exchanged for other securities as a result of any merger,
consolidation or reorganization; or (2) the outstanding number of shares of
common stock of the Company is increased through payment of a stock dividend;
provided, however, that the Company shall not be required to issue fractional
Shares as a result of any such adjustment. If there is any other change in the
number or kind of the outstanding shares of capital stock of the Company, or of
any other security into which such stock shall have been changed or for which it
shall have been exchanged, and if the Committee, in its sole discretion,
determines that such change equitably requires any adjustment in the Option
Rights granted under this Agreement, such adjustment shall be made in accordance
with the determination of the Committee. No adjustments shall be required by
reason of the issuance or sale by the Company for cash or other consideration of
additional sales of its capital stock or securities convertible into or
exchangeable for shares of its capital stock. All adjustments shall be made in
such a manner that will allow the Option Rights to continue to qualify under
Section 422A as "Incentive Stock Option" rights.
New option rights may be substituted for the Option Rights, or the Company's
duties under this Agreement may be assumed by an employer corporation other than
the Company, or by a parent or subsidiary of such employer corporation, in
connection with any merger, consolidation, acquisition, separation,
reorganization, liquidation, or like occurrence, where the Company is involved,
in such a manner that will allow the Option Rights to continue to qualify as
"incentive stock option" rights under Section 422A and to the full extent
permitted thereby. Notwithstanding the foregoing provisions of this Paragraph 5,
in the event such employer corporation, or parent or subsidiary of such employer
corporation, refuses to substitute new option rights for, and substantially
equivalent to, the option rights, or to assume the Options Rights, as permitted
by the Code, the Option Rights shall terminate and therefore become null and
void: (1) upon the reorganization; dissolution or liquidation of the Company, or
similar occurrence; or (2) upon any merger, consolidation, acquisition, or
separation, or similar occurrence, if the Company is not the surviving
corporation; provided, however, that the Employee shall have the right,
immediately prior to or concurrently with such reorganization, dissolution,
liquidation, merger, consolidation, acquisition, separation or similar
occurrence, and upon at least 10 days' written notice thereof, to exercise any
unexpired Option Rights granted under this Agreement to the extent the Option
Rights are exercisable at the time of mailing of such notice, but subject,
nevertheless, to the condition that no Option Rights granted under this
Agreement may be exercised after the Expiration Date.
<PAGE>
In the event that the Board of Directors, in its discretion, determines that it
is in the best interests of the Company to offer its shares of capital stock to
the public pursuant to a registration statement filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, or pursuant to
an exemption under such Act, the Secretary of the Company shall notify the
Employee in writing of such determination. In that event, all outstanding Option
Rights shall become null and void 30 days after such notice is mailed, but the
Employee shall during such 30 day period, have the right to exercise any
unexpired Option Rights granted to him or her under this Agreement to the extent
such Option Rights are exercisable at the time of mailing of such notice, but in
any event subject to the time limitations for exercise of the Option Rights
provided in the Code.
6. Method of Exercise; Rights of Optionee in Stock. The Option Rights shall be
exercisable upon delivery to the Company of an executed Investment
Representation Letter attached hereto as Exhibit A, accompanied by payment in
cash to the Company of the option exercise price as to the Shares being
purchased. Neither the Employee nor his/her personal representatives, heirs, or
legatees shall have any rights or privileges of a shareholder of the Company in
respect to the Shares issuable upon the exercise of the Option Rights, unless
and until certificate(s) representing such shares shall have been issued and
delivered in accordance with the terms hereof.
7. Notices. Any notice to be given under the terms of this Agreement shall be
mailed, telegraphed or delivered, and confirmed, to the Company, in care of its
Secretary, at the principal office of the Company, and any notice to be given to
the Employee shall be mailed, telegraphed or delivered, and confirmed, to him or
her at the address given beneath his/her signature hereto, or at such other
address as either party may hereafter designate in writing to the other. Any
such notice shall be deemed to have been duly given 48 hours after the deposit
in the United States mail, addressed as mentioned before, registered or
certified and postage and registry or certification fee prepaid.
8. Date of Grant. The Option Rights shall be deemed to have been granted on the
date when the Company executed this Agreement and notified the Employee of the
granting of the Option Rights. Such date is within 10 years from the Effective
Date as defined in the Plan.
<PAGE>
9. Option Rights Governed by Plan and Internal Revenue Code. The provisions of
the Plan shall be deemed to be incorporated in and to have been made a part of
this Agreement, and shall be deemed to be controlling in the event that any of
the provisions of this Agreement are inconsistent. This Agreement shall be
deemed to include such other provisions not set forth in the Plan or herein, or
inconsistent with any provisions set forth in the Plan or herein, as may be
necessary to qualify the option granted under this Agreement as an "incentive
stock option" under Section 422A.
10. Acquisition for Investment. By accepting this Stock Option Agreement, the
Employee represents, covenants, and warrants for himself/herself, his/her
personal representatives, heirs, and legatees that such stock Option Rights are
being acquired with no view to any distribution and that, upon each issuance of
Shares in accordance with this Agreement, the Employee, his personal
representatives, heirs, or legatees receiving such Shares shall, if requested,
represent in writing to the Company that such Shares are being acquired with no
view to any distribution or shall make such other representations in writing to
the Company, with respect to the further transfer of such Shares, as may be
deemed by the Company to be necessary or appropriate under the applicable
federal and state securities laws. The Company, at its sole discretion, may take
all reasonable steps (including the affixing of an appropriate legend on
certificates embodying such Shares) to assure itself against any resale or
distribution not in compliance with federal or state securities laws.
11. Persons Bound. Subject to the provisions against assignment set forth in
Section 4 hereof, this Agreement shall be binding upon and inure to the benefit
of any successor or successors of the Company, and the personal representatives,
heirs, and legatees of the Employee.
12. Stock Restriction Agreement. By executing this Agreement, the Employee
agrees to be bound by all the terms and conditions of the form of Stock
Restriction Agreement of the Company that is in existence immediately prior to
the date that any Option Rights are exercised, a copy of which shall be
delivered to him prior to his exercise of the Option Rights. The Stock
Restriction Agreement shall include provisions that: (1) prohibit the Employee
from transferring any Shares to a third party without first offering the Shares
to the Company and its other shareholders for purchase; and (2) grant the
Company and its other shareholders options to purchase any or all of the Shares
of an Employee who dies, becomes disabled or files for bankruptcy or whose
employment with the Company is terminated.
The Company has caused this Agreement to be executed on its behalf by an officer
of the Company, on the date set forth above, and the Employee has executed this
Agreement on or as of such date, which date is the time of the granting of the
Option Rights.
We have carefully reviewed this contract and agree to and accept its terms and
conditions. We are executing this Agreement as of the day and year first written
above.
Employee: CBQ,
Inc.
By By
Name Name
Executive Committee:
<PAGE>
Exhibit A
Investment Representation Letter(Month, Day, Year)
To the Board of Directors of CBQ, Inc.
Gentlemen:
I am the holder of certain incentive stock options rights (the "Option Rights")
granted to me pursuant to a certain Stock Option Agreement dated between CBQ,
Inc. (the "Company") and me (the Agreement). Pursuant to Section 6 of the
Agreement, the Company is hereby notified of my election to exercise my Options
Rights to purchase shares of common stock of the Company (the Shares) at the
price and on the terms provided for in the Agreement. A check in the amount of $
, representing the aggregate purchase price for the Shares is being delivered to
you together with this letter.
In connection with the foregoing, I hereby make the following representations,
warranties and covenants on which the Company is entitled to rely:
1. I have received a copy of the Reliance Technology 1999 Incentive Stock Option
Plan adopted as of (Plan) and the Agreement, have read and understand the Plan
and the Agreement and agree to be bound by their respective terms and
conditions.
2. I am acquiring the Shares solely for my own account (and not directly or
indirectly for the account of any other person whatsoever), for investment and
not with a view to or for sale in connection with any distribution of the
Shares.
3. I have either (1) a pre existing personal or business relationship with the
Company or any one of its partners, officers, directors, or controlling persons,
or (2) such knowledge and experience in financial and business matters that I am
capable of evaluating the merits and risks of acquiring the Shares.
<PAGE>
4. I have had access to such information concerning the Company, including
financial information, as I deem necessary to enable me to make an informed
decision concerning my acquisition of the Shares.
5. I am aware that I must bear the economic risk of investment in the Shares for
an indefinite period of time because the Shares have not been registered under
the Securities Act of 1933 ("1933 Act") or any state securities act, and the
Shares cannot be sold unless they are subsequently registered under the 1933
Act, applicable state securities acts, or exemptions from such registrations are
available.
6. I am aware that the Shares are subject to restrictions on transfer imposed by
the 1933 Act and applicable state securities acts, and that the Company shall
place on the certificates representing the Shares legends setting forth such
restrictions.
7. I confirm the terms of Section 12 of the Agreement that requires me to become
a party to, and be bound by the terms and conditions of, a certain Stock
Restriction Agreement to be entered into between the Company and me with respect
to the Shares, a copy of which has been provided to me for my review.
8. I am a resident.
Very truly yours,
(Signature)
(Name and Address)
(SSN)
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8 KSB
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
November 19, 1998
(Date of Report)
CBQ, Inc.
(Exact name of registrant as specified in its charter)
Colorado
(State or other jurisdiction of incorporation)
33 14707 NY 84 1047159
(Commission File Number) (IRS Employer Identification Number)
4851 Keller Springs Rd., Ste. 213, Dallas, Texas 75248
(Address of principal executive offices including zip code)
(972) 732 1100
(Registrant's telephone number including area code)
Freedom Funding, Inc., 1999 Broadway, Ste. 3235, Denver, Colorado 80202
Former name or former address, if changed since last report)
<PAGE>
Item 1. Change in Control of Registrant.
Acquisition of CyberQuest, Inc.
On November 19, 1998, Freedom Funding, Inc., a Colorado corporation (Company),
entered into a reorganization agreement (Reorganization Agreement) with
CyberQuest, Inc., a Colorado corporation (CyberQuest), and the shareholders of
CyberQuest pursuant to which the Company acquired all of the outstanding
proprietary interest of CyberQuest in a stock for stock exchange which resulted
in CyberQuest becoming a wholly owned subsidiary of the Company and the
shareholders of CyberQuest acquiring control of the Company through their stock
ownership.
The Reorganization Agreement calls for the immediate change of the name of the
Company to CBQ, Inc., and the immediate effectuation of a reverse one for four
(1:4) common share split. The Company has initiated this process and anticipates
that the name change and reverse split should become effective during the first
or second week of December, 1998. All further references in this report are to
post split share figures.
The Company, under the Reorganization Agreement, issued 18,000,000 common shares
and 70,000 shares of the Class A: Redeemable, Convertible Preferred Stock of the
Company to the shareholders of CyberQuest in exchange for the issued and
outstanding shares of this subsidiary. Pursuant to the Reorganization Agreement
the existing director and sole executive officer resigned and the Company
appointed Messrs. Michael Sheriff (Chairman), James E. Malone and R.J. Pipes as
directors. Mr. Sheriff was then appointed Chief Executive Officer, Mr. Malone
President and Treasurer and Mr. William J. Flannery Secretary.
The Series A Preferred Stock issued under the Reorganization Agreement consists
of 70,000 shares with a stated price of $10 per share, and has the following
features: (a) Dividend None. (b) Conversion None. (C) Redemption Elective and
cumulative as follows: (1) from and after November 19, 1998, and up to and
including November 18, 1999, the Company may redeem, at any time and from time
to time, all or any portion of up to 7,000 preferred shares at a price of $10
per share; (2) from and after November 19, 1999, and up to and including
November 18, 2000, the Company may redeem, at any time and from time to time,
all or any portion of (y) the preferred shares not redeemed under (1) and (z) up
to an additional 14,000 preferred shares at a price of $11.00 per share; (3)
from and after November 19, 2000, and up to and including November 18, 2001, the
Company may redeem, at any time and from time to time, all or any portion of (y)
those preferred shares not redeemed under (1) and (2) and (z) up to an
additional 21,000 preferred shares at a price of $12.00 per share; and (4) from
and after November 19, 2001, and up to and including November 18, 2002, the
Company may redeem, at any time and from time to time, all or any portion of (y)
those preferred shares not redeemed under (1), (2) and (3) and (z) up to an
additional 28,000 preferred shares at a price of $13.00 per share. (d)
Liquidation Preference None. (e) Sinking Fund None. (f) Voting Rights None. (g)
Additional Provisions In the event that the Company offers and sells at any time
during which any shares of Preferred Stock remain outstanding any share of
common stock of the Company at a price of less than $5.00 per share on a
private, non registered basis, the Company will grant to the holder(s) of any
then outstanding shares of Preferred Stock a warrant allowing the acquisition of
one share of common stock for each ten shares of common stock issued and sold.
The warrant will be exercisable for a period of one (1) year after grant at the
price for which the shares of common stock causing the imposition of this
provision were issued and sold.
<PAGE>
Overview of CyberQuest:
Founding and Business Summary: CyberQuest began operations in January, 1996.
CyberQuest's web site is at http://www.cbq.com, with principal executive offices
at 4851 Keller Springs Road, Suite 213, Dallas, TX 75248. The telephone number
at this address is: (972) 732 1100; the facsimile number is: (972) 732 1169; and
the e mail address is: [email protected].
CyberQuest is a full service Internet development company, focusing its efforts
on Internet commerce in the business to consumer and business to business
marketplace. CyberQuest also develops, implements and maintains business Web
Sites, Intranets and Databases for client companies.
CyberQuest management has several years experience with marketing and the use of
the Internet. Management first developed a straight forward method that allows
small, medium and large businesses to integrate and manage Internet sites in
order to complement their other selling efforts. In 1994, pioneering the
Internet marketplace, management developed and launched one of the first
Internet retail commerce sites, the award winning Good Stuff Cheap, which offers
resellers a medium for marketing merchandise and selling excess inventory
through secured transactions. This site has been featured in a number of
publications, including USA TODAY Hot Site, The Dallas Morning News, the NET,
Wired, WebWeek, and the Discovery Television Internet commerce sites developed
by management have won a number of awards and recognition for excellence in
graphics and overall media presentation.
In April, 1996, acquired and significantly enhanced the technology for bid4it
under a world wide license from EDS. CyberQuest, using bid4it, has introduced a
new sales paradigm the interactive on line exchange (Exchange) in a bid and ask
format. Designed to serve as an efficient and entertaining sales channel for
popular products over the World Wide Web (Web) the site is designed to appeal to
businesses, resellers and consumers. Management believes that bid4it is a new
sales channel for the Internet and that users are attracted to the site because
of its win/win format and convenience. Management believes that there is a
significant market for bid4it; especially for excess and unique merchandise.
Management Team: CyberQuest's leadership team is headed by Messrs. Mike Sheriff,
CEO, and Jim Malone, President. The management staff also includes Tommie
Farris, Commerce Business Manager.
<PAGE>
Executive Summary:
Internet Opportunity Presented by bid4it.com: Businesses have aggressively begun
to use the Internet as a fourth channel of distribution. Bid4it
(www.bid4it.com), CyberQuest's newest E Commerce site, is designed to serve as
an efficient, entertaining and market driven e tailing channel for popular
products over the Web. The site, management believes, appeals to businesses,
resellers and consumers alike, and the Company believes that this on line
exchange (Exchange) represents a new sales format that it believes will be
further and more widely accepted because it leverages the unique characteristics
of the Internet. Bid4it brings the e market experience, along with all of its
dynamics, directly into corporate offices and consumers homes and home offices.
Buyers can bid for products 24 hours a day, 7 days a week in a relaxed
atmosphere without the pressure of salespeople and without the inconvenience of
traveling to fixed locations during limited hours. In addition, a sense of
community is engendered as buyers place bids relative to perceived value and
sellers compete for customers in an interactive Exchange sales format.
Bid4it has and will offer a wide variety of new merchandise, including
computers, peripherals, consumer electronics, program cars, rare wines, power
tools, sports and fitness equipment and jewelry. Using CyberQuest's proprietary
bid4it Exchange software, the core technology for which was provided under a
license with EDS, customers bid in a freely competitive market without the
constraints of less flexible pricing that characterize traditional retailing or
the inconvenience or other limitations of an auction. Sellers are able to issue
competing, confidential asking prices and buyer's bids set the price. Using
CyberQuest's proprietary CyberMarketMaker technology, the bids are sorted in
order of submission by price of bid. If two bids match the ask price, the
earlier bid will win based on available inventory. Likewise, if multiple asks
match a bid, the first ask placed will be matched. In response to market
activity, i.e. orders and bids, CyberMarketMaker will adjust the asking prices
up or down accordingly. This Exchange format encourages a negotiation between
bidder and seller in a market making environment.
Bidders continually maintain control of their bids, having the ability to
withdraw, modify or lower a bid from the privacy of their own password protected
home pages. Sellers also maintain complete control from the privacy of their
password protected home pages. Sellers, who may remain anonymous, are in full
control of the terms of the sale. The seller may establish minimum quantities
and, in addition to the asking price, set a floor price below which no sale can
occur. In addition, the vendor may remove items from the site at will or may
change quantities to reflect the vendor's current inventory position. Further,
sellers are free to accept any bid below the ask at their discretion. With this
innovative way to purchase goods and services on the Internet, CyberQuest
answers the needs of the corporate community, small businesses, resellers and
consumers by providing an optimum marketplace to conduct commerce.
<PAGE>
CyberQuest believes that by constantly changing the presentation of its Web site
it will enhance customer interest and attract and maintain a large and loyal
customer base. bid4it's rotating merchandise mix gives customers the opportunity
to bid on desirable merchandise from a number of different product categories,
mostly from well known, name brand manufacturers. This changing product/price
mix and the bid4it Exchange format gives CyberQuest's potential customers the
impression that they may be able to negotiate exceptional deals every time they
visit the site.
Customer satisfaction is assured through agreements with vendors regarding
product guarantees and return privileges. Customer service functions are
integrated and interactive by using on line forms and E mail communication. The
customer service staff also offers assistance toll free during office hours.
Operating under the Principal Sales Model, CyberQuest takes title to the
merchandise, but carries no inventory. Its transaction fees, i.e. margins, are
improved when CyberQuest acts as its own seller/distributor, accepting lower
distributor discounts in exchange for vendor stocking and drop shipping.
Market Analysis:
Market Opportunity: Commerce conducted over the Web is expected to grow
dramatically from $2.6 billion in 1996 to over $220 billion during 2001,
according to International Data Corporation (IDC), a Boston, MA. market research
firm. Demographics of the more than 30 million potential Web users in 1996,
according to BancAmerica researchers, included 15 million US households, 12
million US businesses, government and educational institutions and 4 million non
US users. CyberQuest believes it is positioned to effectively compete with its
Exchange on the Internet. To that end CyberQuest intends to leverage its
position as an Internet e tailer of brand name merchandise and to build upon its
strategic relationships with vendors, which will encouraging use of the bid4it
Exchange for inter vendor purchases.
Target Market: The target seller base is equipment manufacturers, major
distributors, and resellers of hard goods, and in some instances, services. Each
segment requires specific custom features, but generally each requires bid4it to
provide efficiency over the current methods employed to buy or sell similar
products.
<PAGE>
Market Size: The current market for CyberQuest's services is the approximately
50 million businesses, industries, small office and consumer components of
Internet users. Further, the growth of Web based Internet users is expected to
more than double in 1998 to 71.3 million. Estimates for the year 2000 put the
growing mass at over 120 million Web users. The business to business component
holds the greatest potential for CyberQuest as businesses transition
manufacturing and corporate purchasing to the Web. The experience of direct
competitors has proven the viability of the market and the willingness of
consumers to adopt the Internet as an effective, viable and alternative
distribution channel.
Competition: Direct competition for CyberQuest's bid4it Exchange is expected to
come from several segments. The Internet auction sites, most notably e bay
(EBAY), Onsale (ONSL) and FirstAuction, represent CyberQuest's most formidable
opponents. FirstAuction is owned and operated by The Internet Shopping Network
(ISN), a large, mall type Web site which was launched in late 1994. ISN is owned
by Home Shopping Network, the multi billion dollar TV broadcast retailer.
FirstAuction debuted in the summer of 1997, following a format very similar to
Onsale.
CyberQuest's challenge is be to differentiate its bid4it Exchange as superior to
the auction format. CyberQuest must also successfully build a brand identity
which positions bid4it as the preferred site for buyers of new and unique
products; the type of products typically not found at auction sites. As
CyberQuest's business to business activity grows, management believes that the
market will support the bid4it Exchange, which may co exist with the auction
type sites; each with its own market identity and niche. Because the desired
keywords or categories may be pre sold, CyberQuest must identify new strategic
partnership opportunities which are synergistic to the bid4it Exchange, but not
likely targets for an auction site partnership. The identified partnerships
would function similarly to a sub license arrangement. The difference in the two
is that instead of building a customized site for the sub licensor where their
buyers would, upon selecting (clicking on) a specified product or other
predetermined icon bid, the partner's bidders would come to bid4it from the
partner's Web site to place their bids. This arrangement would net the partner a
commission, or alternatively, would net bid4it a commission depending upon the
agreement of the partners. As business to business sales increase, CyberQuest's
challenge is to introduce a continual stream of new trading partners to become
users of the bid4it Exchange. This means that CyberQuest's competition for new
business users will more likely come from those competitors who are unwilling to
change their traditional purchasing methods rather than from any like or similar
Internet competitor to bid4it.
<PAGE>
The field of direct competitors is expected to continue to grow and CyberQuest
intends to maximize its marketing, advertising and public relations efforts
while few market leaders are clearly established. Further, management will
emphasize efforts to establish relationships with leading on line content
providers, commerce companies and leading manufacturers in key product
categories to secure merchandise supply and build competitive barriers to entry.
CyberQuest's indirect competition comes from any Internet E Commerce site which
sell similar products and from traditional channels of supply.
Business Strategy: CyberQuest's objective is to become the dominant business to
business Exchange on the Internet. CyberQuest intends to leverage its position,
if and when obtained, as a leading Internet e tailer of brand name merchandise
to build strategic relationships with vendors who will use the Exchange
ultimately to purchase from each other. The following are CyberQuest's key
strategies:
Create Market Awareness and Brand Recognition: CyberQuest operates in a market
in which brand franchise is critical to attracting high quality vendors and high
level customer traffic. Accordingly, CyberQuest's strategy is to promote,
advertise and increase its visibility through a variety of marketing and
promotional techniques, including forming strategic relationships with major
Internet Service Providers (ISPs), search engines and directories by advertising
on leading Web sites and in targeted trade publications and by conducting an
ongoing public relations campaign. In particular, CyberQuest will seek to
establish relationships with leading on line content providers and commerce
companies to attract traffic to its sites, secure merchandise supply and build
competitive barriers to entry.
Strategic Relationships: CyberQuest has formed the following strategic
relationships in order to set the foundation in the pursuit of its business
strategy:
EDS. As the licensor of the core technology, EDS has a vested interest in
CyberQuest's success. In addition, EDS is potentially a large customer as the
original code was developed for internal EDS use.
Search Engines. CyberQuest has conducted short term tests of banner advertising
on both Yahoo! and Infoseek. In 1999 CyberQuest anticipates that it will focus
on increased use of banner ads on all major search engines. Additionally, where
available, CyberQuest will contract for applicable key words.
<PAGE>
Content Providers. CyberQuest anticipates that it will initiate discussions with
major content providers, such as America Online (AOL), Netscape, Ziff Davis and
ESPN with the intent of building site traffic levels utilizing the pattern
established by other high traffic commerce sites such as Amazon.com, Onsale.com
and FirstAuction.com, among others.
Vendors. All sellers on bid4it are actively encouraged to promote the site where
possible, as it is in the best interest of all parties. This can take the form
of links or banner ads on seller Web sites, press releases, or direct promotion
in alternative advertising.
Vendors: CyberQuest's ability to attract, secure and obtain branded merchandise
for its bid4it Exchange is the key to its success. CyberQuest plans to build its
merchandising staff to facilitate and secure long term relationships with a
variety of merchandise vendors. CyberQuest seeks to be its vendors' preferred
choice for liquidating excess merchandise or selling unique and rare items.
CyberQuest intends to strengthen its vendor relationships by offering more
convenient service through its automated order processing and superior
logistical arrangements. In addition, the Company believes its continuous
Exchange process makes it a convenient sales channel for vendors to liquidate
large volumes of merchandise; selling to resellers, corporations and consumers
simultaneously. CyberQuest believes a broad array of merchandise can be sold
effectively through its bid4it Exchange format.
CyberQuest recently expanded its lines of merchandise to include rare wines,
Program Cars, and high end computer servers. Management believes the types of
products which could be sold over the bid4it Exchange is limitless and the sale
of services may eventually be included.
CyberQuest believes vendors are attracted by the number of buyers who are
searching for perceived bargain prices and the inherent advantage of setting the
price and controlling the process. Accordingly, CyberQuest intends to continue
offering vendors the opportunity to sell excess, new/current or one of a kind
merchandise at the best prices available in the market and to assist them in the
selection of merchandise, to monitor pricing and to automate the process as
fully as possible.
<PAGE>
CyberQuest believes buyers are attracted by the wide array of opportunities to
buy desired merchandise at perceived bargain prices and the excitement of
competitively winning desired merchandise. Accordingly, CyberQuest intends to
continue offering customers desired merchandise and to routinely rotate the
selection of merchandise. CyberQuest believes that a significant opportunity
exists to develop incremental revenue, including expanding its product mix with
other products that are well suited for the Internet's electronic format.
Product Distribution: CyberQuest's primary responsibility through bid4it is to
manage the bid and ask match transaction set. Sellers are responsible for
inventory, shipment, and management of their portion of bid4it site operation.
In those cases where sellers desire to relinquish bid4it operation to
CyberQuest, CyberQuest will itself become a bid4it seller through strategic
relationships with key manufacturers and distributors who will drop ship to
customers or consign to bid4it's contracted, fulfillment warehouse. This
inventory less distribution is expected to produce potentially higher margins
and will serve to increase the product mix and the number of items offered for
sale.
Sub Licensing Core Technology: CyberQuest will sub license its proprietary
software to third parties and will operate and maintain the derivative versions
for the sub licensors on a fee and royalty basis. Sub licensing will be to
selected markets that complement and add to bid4it, but do not impede its
intended growth or operations. CyberQuest has completed a sub license royalty
agreement with a corporation known as bid4ic's, Inc. This company intends to
pursue the brokered integrated circuit and component marketplace. CyberQuest may
begin to receive significant royalties in 1999 and beyond as bid4ic ramps up and
begins to attain market share.
Web Site Advertising: Cyberquest intends to leverage the high level of traffic
on its Web site to provide an attractive reason for third party advertising on
its Web site. Web Site Development: Early Internet commerce adopters have
discovered that integrating front end customer service systems with back end
order entry systems requires a major investment. In addition to allocating or
purchasing a host computer, businesses must hire or contract programmers to
design and develop the systems, link them to legacy systems, and coordinate and
maintain the end to end solution. In addition, they must pay the telephone
company, service provider fees, and licensing fees for server, client and
database software. Knowing that many businesses do not wish to develop, host or
maintain their own Internet E Commerce sites, CyberQuest believes a substantial
opportunity exists for its Web site development and management services. For
example, bid4it Sellers will be charged for design and graphics on a contract or
time and materials basis when they wish to outsource the work due to overloaded
or in some cases non existent art and graphics staffs. Other incremental revenue
opportunities are expected to develop as the Internet continues to evolve.
<PAGE>
bid4it Core Technology:
Patent Pending Proprietary Software: CyberQuest believes that one of its
competitive advantages is its internally developed patent pending proprietary
software that is specifically designed for its Internet Exchange. The original
software, acquired from EDS under license, has been significantly enhanced by
CyberQuest. EDS expended in excess of thirty man months in the development of
the code and database infrastructure. CyberQuest has agreed to pay EDS a royalty
on net revenues beginning at 8% and declining to 5% over a maximum period of
nine years. Although ownership of the original code remains with EDS, all
derivatives are the exclusive property of CyberQuest. At the present time, major
segments of the code are derivative, and in time most if not all of the code
will be derivative in nature.
Bid Placement: Bid4it provides a graphical user interface (GUI) for buyers to
enter bid requests. The buyer enters a bid either by accepting the lowest asking
price for a particular product or by specifically setting a price at which he
wishes to purchase the product. The bid may be updated at any time by the person
placing the bid. Except for shipping information, the buyer's identity remains
confidential. The bid includes an effective and expiration date, a minimum and
maximum order quantity and the unit price. All bids and orders are managed by
the buyer on private, password protected home pages.
Ask Placement: Bid4it provides both an EDI (Electronic Data Interchange) for
batch transactions and a GUI interface which sellers may use to enter asking
prices and floor prices. The seller is responsible for maintaining the inventory
levels to supports its quotations on the Exchange. An asking price includes an
effective and expiration date, minimum and maximum order quantity, and the floor
price. The seller may also specify lot sizes. Sellers manage the process through
unique, password protected seller home pages. In addition, sellers may specify
an unlimited number of sub sellers or agents, each with their own home pages.
CyberMarketMaker: Bid4it is an automated quotation system, i.e., Exchange, for
products and services modeled after NASDAQ. Bid4it is the market maker for the
products listed on the site. The bid4it "CyberMarketMaker" buys and sells, but
to two distinct groups. Sellers never buy and buyers never sell; therefore,
there is no bid4it spread between asked and bid prices. CyberQuest makes its
money based on the terms negotiated between the seller and buyer.
Notification: Bid4it's default communication with bidders and sellers is by E
mail and hypertext markup language (HTML) forms.
<PAGE>
In the case of sellers, an EDI capability is offered to facilitate efficiency.
When a bid and ask are matched, a message is sent to the successful bidder and a
purchaser order is placed with the seller. On shipment, the bidder receives e
mail notification and a copy of the receivables (credit card) invoice. Special
notification options are offered to sellers for exception case processing. For
example, when a bid quantity exceeds a pre defined amount and the bid price does
not match the seller's asking price, the seller may receive notification, in
addition to e mail, by fax, page or telephone call.
Core Competency: CyberQuest believes that its internal marketing, advertising
and public relations expertise is a core competence due to the nature of the
Internet and its inherent application as an advertising medium. CyberQuest has
developed Web site creation methodologies which have been productized for sale
to client companies on a contract or time and materials basis. This expertise
has been employed in the development of Web sites for clients, including
multination companies such as NEC. CyberQuest has honed its Internet e commerce
abilities through the creation and management of Web sites such as Carrington
Labs' (www.carringtonlabs.com) and Secure Safes (www.securesafes.com). These
methodologies were applied to bid4it. In addition, management's experience with
Good Stuff Cheap has provided additional real time experience in this industry.
Patent and Trademark: CyberQuest has applied for a US patent on the design,
methodology and operation of bid4it, the underlying software and
CyberMarketMaker, and has trademarked bid4it and CyberMarket Maker. Further
CyberQuest owns the domain names:
bid4it, goodstuffcheap.com and cbq.com.
Systems and Hardware Infrastructure: bid4it operates on an Axil Ultima Model
2300 (Sun Microsystems clone), with two 300 MHz UltraSPARC 512 MB RAM, two 4 BG
hard drives, a 4 GB DAT tape backup drive and CD ROM drive, running a Sun
Solaris 2.5.1 UNIX operating system, Sybase SQL Server 11.0.1 for database
applications, Netscape Enterprise Server 3.0 for standard and secure Web site
service and site search engine, Netscape Messaging Server 3.0.1 for standard and
secure e mail service, and WUsage 5 for Web site access statistics. For secure
transactions using the de facto standard Secure Sockets Layer (SSL) technology,
a VeriSign Global Digital Certificate allows 128 bid encryption of Web based
files to be transferred to sites all over the world.
<PAGE>
Management Team:
Michael L. Sheriff (Chairman and CEO): Mr. Sheriff has over 25 years experience
in the computer and telecommunications industry. He founded and developed Good
Stuff Cheap, a pioneer in Internet based retail sites. Good Stuff Cheap,
according to Point Communications, an Internet survey group, was one of the top
five retail sites on the Internet in 1994. Mr. Sheriff also was the former
Chairman, President and CEO of Action Fax International, Inc., which operates
one of the largest public fax networks in the world and was an innovator in the
fax services industry. Prior to Action Fax, Mr. Sheriff was the founder and
President of First National Computer Corporation, which pioneered the rental of
personal computers. Under his direction, First National Computer became one of
the largest PC rental firms in the US. In 1983, Mr. Sheriff co founded and was
Vice President of Five Dimensions Software, Inc., which designed software
systems for the rent to own television and appliance industry, installing over
900 systems. Mr. Sheriff has held senior sales, marketing and management
positions with Data Design & Development, Inc., National Semiconductor, Northern
Telecom, SYCOR, Inc., and SINGER.
James Malone (President): The biographical information for Mr. Malone will be
provided on the next Form 10 KSB.
Tommie P. Farris (Commerce Business Manager): Ms. Farris has over 20 years
experience in the computer industry. She brings to CyberQuest her knowledge of
product marketing, catalog production and merchandising and business research
and analysis. Her responsibilities include bid4it brand recognition, business
and legal management, product merchandising management and seller/client
satisfaction. Prior to CyberQuest, Ms. Farris held the position of senior
marketing research analyst at EDS. Previous areas of responsibility at EDS have
included Internet project management, supplier contract negotiation, management
at the division level, product manager, department supervisor, product marketing
and production management for the EDS/GM microcomputer catalog. Ms. Farris has
experience in start up and development phase businesses, having owned a computer
mail order company in the mid 1980's and having been a member of the original
management team of the predecessor to Dell Computer. Ms. Farris holds a BS in
Education with an emphasis in English.
Item 2. Acquisition or Disposition of Assets: See Item 1, above.
Item 3. Bankruptcy or Receivership: Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant: Not Applicable.
Item 5. Other Events: None.
Item 6. Resignation of Registrant's Directors: Not Applicable.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits: The
required financial statements of CyberQuest will be delivered in accordance with
the requirements of this form.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CBQ, Inc.
(Registrant)
By: /s/ Michael Sheriff
Michael Sheriff, Chief Executive Officer
Date: November 19, 1998
<PAGE>
EXHIBITS
Exhibit 1. Agreement of Purchase (See Exhibit 10.1)
Exhibit 2. Series A Preferred Stock Resolutions and Provisions
(See Exhibit 3.1)
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
FEBRUARY 2, 1999
(NOVEMBER 19, 1998)
CBQ, INC.
(Exact name of registrant as specified in its charter)
COLORADO 33 14707 84 1047159
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
4851 KELLER SPRINGS RD., SUITE 213, DALLAS, TEXAS 75246
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (972) 732 1100
FREEDOM FUNDING, INC., 1999 BROADWAY, STE. 3235, DENVER, COLORADO 80202
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 1. CHANGE IN CONTROL OF REGISTRANT.
On November 19, 1998 (the Closing Date), CBQ, Inc., a Colorado corporation
formerly known as Freedom Funding, Inc. (the Company), consummated an Agreement
of Purchase (the Reorganization Agreement) dated as of the Closing Date among
the Company, CyberQuest, Inc., a Colorado corporation (CyberQuest), and the
individual stockholders of CyberQuest. The Reorganization Agreement provided for
the acquisition of all the outstanding capital stock of CyberQuest by the
Company for consideration of all the outstanding capital stock of the Company,
resulting in the complete control of the Company by the previous stockholders of
CyberQuest. On October 23, 1998, CyberQuest was formed as a result of a
Reorganization Agreement dated October 23, 1998 between CyberQuest and
CyberQuest, Ltd., a Texas limited partnership.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
See Item 1, above.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired
(1) Audited consolidated financial statements of CyberQuest, Ltd.
(b) Pro Forma Financial Information.
(1) Pro Forma Consolidated Financial Statements of CBQ, Inc. at and for the
twenty-one month period ending December 31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CBQ, Inc.
By: /s/ MICHAEL SHERIFF
- --------------------------------------
Michael Sheriff
Chief Executive Officer
Date: February 2, 1999
<PAGE>
EXHIBIT INDEX
Exhibit Description
- ------- -----------
1 Agreement of Purchase dated as of November 19, 1998 among CBQ, Inc., a
Colorado corporation formerly known as Freedom Funding, Inc.,
CyberQuest, Inc., a Colorado corporation, and the individual
stockholders of CyberQuest, Inc.*
2 Series A Preferred Stock Resolutions and Provisions.*
3 Consolidated financial statements of CyberQuest, Ltd. for the eleven
month period ended December 31, 1997.
4 Consolidated financial statements of CBQ, Inc., a Texas corporation
and predecessor of CyberQuest, Ltd. for the period from inception
(April 6, 1995) to December 31, 1996.
* - previously filed.
<PAGE>
EXHIBIT 3
CYBERQUEST, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
Consolidated Financial Statements
December 31, 1997
<PAGE>
CYBERQUEST, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
Table of Contents
Independent Auditors' Report
Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Loss
Consolidated Statements of Changes in Partners' Deficit
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
<PAGE>
INDEPENDENT AUDITORS' REPORT
CyberQuest, Ltd.
Dallas, Texas
We have audited the accompanying consolidated balance sheet of CyberQuest, Ltd.
(a development stage enterprise) as of December 31, 1997, and the related
consolidated statements of loss and partners' capital, changes in partners'
capital, and cash flows for the period from inception (February 10, 1997) to
December 31, 1997. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CyberQuest, Ltd. as
of December 31, 1997, and the results of its operations and cash flows for the
period from inception (February 10, 1997) to December 31, 1997 in conformity
with generally accepted accounting principles.
/s/ Travis, Wolff & Company, L.L.P.
Dallas, Texas
January 8, 1999
<PAGE>
CYBERQUEST, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
Consolidated Balance Sheets
September 30, December 31
1998 1997
(Unaudited)
Assets
Current assets:
Cash $ -- $ --
Accounts receivable 10,197 36,246
--------- ---------
Total current assets 10,197 36,246
--------- ---------
Property and equipment (Note 2):
Equipment 68,676 68,676
Capitalized license fees 112,500 112,500
--------- ---------
181,176 181,176
Less accumulated depreciation and amortization 111,535 63,735
--------- ---------
Net property and equipment 69,641 117,441
Deposits and other assets 10,885 11,983
--------- ---------
Total assets $ 90,723 $ 165,670
========= =========
Liabilities and Partners' Deficit
Current liabilities:
Accounts payable $ 87,676 $ 66,514
Accrued liabilities 28,642 24,619
--------- ---------
Total current liabilities 116,318 91,133
--------- ---------
Other liabilities (Note 4) 125,572 125,572
--------- ---------
Commitments and contingencies (Notes 1, 2, 3, 4 and 5)
Partners' deficit (Note 1):
General partner (160,826) (37,810)
Limited partners (9,659) (13,225)
--------- ---------
(151,167) (51,035)
--------- ---------
Total liabilities and partners' equity $ 90,723 $ 165,670
========= =========
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
CYBERQUEST, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
Consolidated Statements of Loss
Period from
Inception
(February 10,
Nine Months 1997) to
Ended September 30, December 31,
1998 1997 1997
(Unaudited)
Revenues $ 139,010 $ 100,681 $ 136,122
--------- --------- ---------
Costs and Expenses:
General and administrative expense 191,342 543,511 664,099
Depreciation and amortization (Note 2) 47,800 48,500 63,735
--------- --------- ---------
239,142 592,011 727,834
--------- --------- ---------
Net loss $(100,132) $(491,330) $(591,712)
========= ========= =========
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CYBERQUEST, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
Consolidated Statement of Changes in Partners' Deficit
General Limited Partners'
Partner Partners Deficit
-------- -------- ---------
<S> <C> <C> <C>
Balance at inception, February 10, 1997 $ -- $ -- $ --
Reorganization (Note 1) -- (59,323) (59,323)
Contribution of capital by new limited partner (Note 1) -- 600,000 600,000
Net Loss (37,810) (553,902) (591,712)
--------- --------- ---------
Balance at December 31, 1997 (37,810) (13,225) (51,035)
Net Loss (unaudited) (8,315) (121,817) (100,132)
--------- --------- ---------
Balance, September 30, 1998 (unaudited) $ (46,125) $(135,042) $(151,167)
========= ========= =========
The accompanying notes are an integral part
of the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CYBERQUEST, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
Consolidated Statements of Cash Flows
Period from
Nine Months Inception
Ended September 30, February 10, 1997) to
1998 1997 December 31, 1997
---- ---- -----------------
(Unaudited)
Cash flows provided by operating activities:
<S> <C> <C> <C>
Net loss $(100,132) $(491,330) $ 59,712
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 47,800 48,500 63,735
Changes in operating assets and liabilities:
Decrease (Increase) in accounts receivable 26,049 (26,296)
Decrease (Increase) in deposits and other assets 1,098 (18,135) (13,746)
(Decrease) Increase in accounts payable 21,162 22,598 (11,983)
(Decrease) Increase in other liabilities -- (17,500) 44,691
(Decrease) Increase in accrued liabilities 4,023 10,297 (24,428)
Net cash used in operating activities -- (471,866) (508,824)
Cash flows used in investing activities:
Purchase of property and equipment -- (45,634) (68,676)
Cash flows provided by financing activities:
Proceeds from capital contribution -- 517,500 577,500
Net increase in cash -- -- --
Cash, beginning of period -- -- --
Cash, end of period $ -- $ -- $ --
Supplemental disclosure of non-cash financing activities:
Limited Partner contribution receivable $ -- $ -- 22,500
========= ========= =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
CYBERQUEST, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Financial Statements
(Information as of interim periods ended September 30, 1998 and 1997 is
unaudited)
Note 1 - The Partnership and Going Concern Considerations
CyberQuest, Ltd., a development stage enterprise (the "Partnership"), is a Texas
limited partnership and began operation on February 10, 1997. The general
partner is CyberQuest Management Group, L.L.C. The Partnership assumed the
assets and liabilities of CBQ, Inc., (formerly CyberQuest Inc.), on February 10,
1997 in exchange for granting a 22.11 percent limited partner interest to the
CyberQuest, Inc.'s shareholders. CBQ, Inc. is now wholly-owned by the
Partnership. The transaction was recorded as reorganization accounted for in a
manner similar to a pooling of interests. During 1997, new investors contributed
a total of $600,000 cash in exchange for limited partner interests totaling 71.5
percent. The assets, liabilities and operations of CBQ, Inc. through February
10, 1997, were not significant. The net deficit of CBQ, Inc. at the date of the
reorganization is included in the Statement of Partner' Deficit as a
reorganization adjustment. The Partnership has developed an internet-based site,
Bid4it, through which buyers and sellers can trade products in an auction
format. The Bid4it site was launched in October 1997. The Partnership has no
significant revenue or operations through December 31, 1997.
<PAGE>
The general partner owns 6.39 percent and the limited partners own 93.61
percent. The financial statements do not reflect assets the partners may have
outside their interests in the partnership, nor any personal obligations,
including income taxes, of the individual partners.
The Partnership is currently engaged in raising capital and continued
development of Bid4it. Funding of the day to day operations has been achieved
through contributions of capital from limited partner.
The Partnership's financial statements are presented on the going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The Partnership is seeking additional working
capital and equity capital to adequately fund operating losses and strategic
growth.
The Partnership's continued existence is dependent upon its ability to resolve
its liquidity problems, principally by obtaining debt financing and/or equity
capital. While pursuing additional debt and equity funding, the Partnership must
continue to operate on limited cashflow generated internally.
Working capital limitations continue to impinge on day-to-day operations, thus
contributing to operating losses. The continued support and forbearance of its
vendors and will be required, although this is not assured.
<PAGE>
CYBERQUEST, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Financial Statements
(Information as of interim periods ended September 30, 1998 and 1997 is
unaudited)
Note 2 -Summary of Significant Accounting Policies
Basis of presentation
The consolidated financial statements include the accounts of the Partnership
and CBQ, Inc. All significant inter-company balances and transactions have been
eliminated.
The Partnership's balance sheet as of September 30, 1998 and the related
statements of loss, cash flow and deficit for the nine-month periods ended
September 30, 1998 and 1997 are unaudited. These unaudited financial statements
have been prepared from the books and records of the Partnership and reflect all
adjustments that are, in the opinion of management, necessary for a fair
statement of the results for the periods. All such adjustments are, in the
opinion of management, of a normal recurring nature. Operations results for the
nine-month period ended September 30, 1998 is not necessarily indicative of the
results that may be expected for the year ending December 31, 1998.
Property, equipment and depreciation
Property and equipment are carried at cost. Depreciation is computed on a
straight-line basis over the estimated useful lives of three to five years. The
carrying value of property and equipment is evaluated periodically in relation
to operating performance of the related business.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect the financial statements at, and during the reporting periods. Actual
results could differ from these estimates.
Income taxes
The Partnership does not incur income taxes for federal income tax purposes.
Instead, its earnings and losses are included in the personal returns of the
partners and taxed accordingly.
Capitalized software
Capitalized software consists of minimum amounts owed under a license agreement.
The amounts are being amortized on a straight-line basis over a period of three
years.
Note 3 - Risks and Uncertainties
The Partnership's results in the development, operations and servicing of the
Bid4It operations may vary significantly given the nature of the emerging but
competitive Internet market. The success of the Partnership will depend upon a
variety of factors not within the Partnership's control, such as: Internet
growth, risk of Internet failures, competition, changes in technology, fraud,
and government regulations.
<PAGE>
Note 4 - Commitments
CBQ, Inc. has a license agreement with Electronic Data Systems Corporation (EDS)
relating to certain proprietary software. The license agreement terminates at
the earlier of April 19, 2004 or upon the Partnership's payment to EDS of
$350,000, including amounts related to the license of certain technology
discussed below. No royalties were owed at December 31, 1997 or 1996.
Other liabilities include minimum royalties due EDS related to the license
discussed above in the development of the Bid4it web site. The amount is due in
annual installments of $50,000 in 1997 and $75,000 in 1998. The agreement was
subsequently amended to extend the payments dates to 1999 and 2000,
respectively, and extend the license agreement above to April 19, 2006.
The Partnership has an office lease commitment that requires payments of $1,792
per month through March 31, 1999.
Note 5 - Subsequent Events (unaudited)
On October 23, 1998, the Partnership entered into an to form new a corporation,
Cyberquest Inc. ("CI"). CI is a Colorado Corporation chartered on October 19,
1998. The agreement provided for the contribution of certain software technology
and $180,000 cash in exchange for 90,000 shares of common stock in CI and a
warrant for the purchase of 80,000 shares at $2.50 per share. The Partnership
agreed to contribute assets and liabilities in exchange for 10,000 shares of
common stock, 70,000 shares of preferred stock and warrants for the purchase of
40,000 shares of common stock at $2.50 per share. The warrants expire on October
23, 2003.
The preferred stock issued is redeemable at the option of CI as follows:
* 7000 shares at the greater of $10.00 per share or the traded market value of
the preferred stock on or before October 23,1999
* 14,000 shares at the greater of $10.715 per share or the traded market value
of the preferred stock on or before October 23,2000
* 21,000 shares at the greater of $11.905 per share or the traded market value
of the preferred stock on or before October 23,2001
* 28,000 shares at the greater of $12.50 per share or the traded market value of
the preferred stock on or before October 23, 2002 Any preferred stock not
redeemed by the CI may at the Company's option be converted to common stock of
CI on the basis of four shares of common stock for one share of preferred stock
converted. CI also granted an incentive option to acquire 25,000 shares of
common stock at $.10 per share if a merger with a publicly traded entity on a
national stock exchange is completed with ninety days of the CI/Company merger.
<PAGE>
On November 19, 1998, CI was acquired by Freedom Funding, Inc. (Freedom), a
public shell listed on the Over-the-Counter bulletin board, in a reverse
acquisition accounted for as a recapitalization. CI is the accounting acquirer.
Freedom had no assets as of September 30, 1998 or operations for the nine-month
period ended September 30, 1998. Subsequently, Freedom changed its name to CBQ,
Inc. The CI stockholders received 18,000,000 shares of common stock (par value
$.0001 per share) and 70, 000 shares of Series A preferred stock (par value
$10.00 per share). The call provisions of the Series A preferred stock are the
same as the CI preferred stock except the call prices range from $10.00 to
$13.00 and there is no conversion feature.
The following is the unaudited pro forma Stockholders' equity as if the
reorganization of CI and the merger with Freedom Funding, Inc. had occurred on
September 30, 1998:
<TABLE>
<CAPTION>
Common Stock Preferred Stock Accumulated Partners'
Shares Values Shares Values Deficit Deficit Total
------ ------ ------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
CyberQuest, Ltd. at
September 30, 1998 -- $ -- -- $ -- $ -- $ (151,167) $ (151,167)
Reorganization into CI 70,000 700,000 100,000 180,000 (851,167) 151,167 180,000
70,000 700,000 100,000 180,000 (851,167) -- 28,833
Merger with Freedom
Funding Inc on
November 19, 1998 -- -- 19,975,325 (177,992) 177,992 -- --
70,000 $ 700,000 20,075,325 $ 2008 $ (673,175) $ -- $ 28,833
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>
EXHIBIT 4
CBQ, INC.
(FORMERLY CYBERQUEST, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
Financial Statements
December 31, 1996
Table of Contents
Independent Auditors' Report
Financial Statements:
Balance Sheet
Statement of Loss
Statement of Stockholders' Deficit
Statement of Cash Flows
Notes to Financial Statements
<PAGE>
INDEPENDENT AUDITORS' REPORT
CBQ, Inc.
Dallas, Texas
We have audited the accompanying balance sheet of CBQ, Inc. (formerly
CyberQuest, Inc.) (a development stage enterprise) as of December 31, 1996, and
the related statement of loss, stockholders' deficit, and cash flows for the
period from inception (April 6, 1995) to December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CBQ, Inc. as of December 31,
1996, and the results of its operations and cash flows for the period from
inception (April 6, 1995) to December 31, 1996 in conformity with generally
accepted accounting principles.
/s/ Travis Wolff & Company, L.L.P.
Dallas, Texas
January 8, 1999
<PAGE>
CBQ, INC.
(FORMERLY CYBERQUEST, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
Balance Sheet
December 31, 1996
Assets
Current assets:
Cash $ 3,208
Accounts receivable 3,270
6,478
Capitalized license fees, net of $37,500
accumulated depreciation (Note 1 and 3) 112,500
Deposits and other assets 16,953
Total assets $ 135,931
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable ($18,282 to affiliate) $ 19,479
Accrued liabilities 6,000
Other liabilities (Note 3) 153,481
Total liabilities 178,960
Commitments and contingencies (Notes 1 and 3)
Stockholders' Deficit:
Common stock; 10,000,000 shares authorized;
3,076,333 issued and outstanding;
par value of $.01 per share 30,763
Accumulated Deficit (73,792)
Total liabilities and stockholders' deficit $ 135,931
The accompanying notes are an integral part of the financial statements.
<PAGE>
CBQ, INC.
(FORMERLY CYBERQUEST, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
Statement of Loss For the
Period From Inception (April 6, 1995) to December 31, 1996
Revenues $ 53,344
---------
Costs and Expenses:
General and administrative (Note 2) 89,636
Amortization expenses 37,500
---------
127,136
---------
Net loss $ (73,792)
=========
The accompanying notes are an integral part of the financial statements.
<PAGE>
CBQ, INC.
(FORMERLY CYBERQUEST, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
Statement of Stockholders' Deficit
For the Period from Inception (April 6, 1995)
to December 31, 1996
Common Stock Accumulated
Shares Amount deficit
------ ------ -------
Balance, at inception (April 6, 1995) -- $ -- $ --
Issuance of common stock to founders
for organization costs and acquisition of
certain technology (Note 2) 3,076,333 30,763 --
Net loss -- -- (73,792)
--------- --------- ---------
Balance, December 31, 1996 3,076,333 $ 30,763 $ (73,792)
========= ========= =========
The accompanying notes are an integral part of the financial statements.
<PAGE>
CBQ, INC.
(FORMERLY CYBERQUEST, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
Statement of Cash Flows
For the Period From Inception
(April 6, 1995) to December 31, 1996
Cash flows provided by operating activities:
Net loss $ (73,792)
Adjustments to reconcile net loss
to net cash provided by (used in) operating activities:
Depreciation and amortization 37,500
Changes in operating assets and liabilities:
Increase in accounts receivable (3,270)
Decrease in deposits and other assets 13,810
Increase in accounts payable 19,479
Increase in accrued liabilities 6,000
Increase in other liabilities 3,481
---------
Net cash provided by operating activities 3,208
---------
Net change in cash 3,208
Cash, beginning of period --
---------
Cash, end of period $ 3,208
=========
Supplemental disclosure of non-cash
investing/financing activities:
Capitalized license fees payable $ 150,000
=========
Issuance of 3,076,333 shares of common stock for
services rendered and technology $ 30,763
=========
The accompanying notes are an integral part of the financial statements.
<PAGE>
CBQ, INC.
(FORMERLY CYBERQUEST, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Financial Statements
December 31, 1996
Note 1 - The Company and Summary of Significant Accounting Policies
The Company
CBQ, Inc., a development stage enterprise (the Company), was incorporated under
the laws of the State of Texas on April 6, 1995, and began operation in January
1996. The Company has no significant revenue or operations through December 31,
1996. The Company is developing an internet-based site, Bid4it. Through this
site, buyers and sellers can trade products in an auction format.
Cash and cash equivalents
Cash and cash equivalents are defined as cash and investments that have a
maturity of less than three months.
Property, equipment and depreciation
Property and equipment are carried at cost. Depreciation is computed on a
straight-line basis over the estimated useful life of three years. The carrying
value of property and equipment is evaluated periodically in relation to
operating performance of the related business.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect the financial statements at, and during the reporting periods. Actual
results could differ from these estimates.
Income taxes
The Company has a net operating loss for income taxes. Due to the regulatory
limitations in utilizing the loss, it is uncertain whether the Company will be
able to realize a benefit from these losses. Therefore, a deferred tax asset has
not been recorded. There are no significant tax differences requiring deferral.
Capitalized software
Capitalized software consists of minimum amounts owed under a license agreement.
The amounts are being amortized on a straight-line basis over a period of three
years.
<PAGE>
Note 2 - Common Stock and Related Party Transactions
The Company acquired an Internet site, GoodStuffCheap from an entity -
Commonwealth Trading Company, wholly owned by a Company's shareholder in
exchange for 214,667 shares of common stock. The Company also issued 150,000
shares for certain services and expenses incurred. The shares were recorded at
par value with a charge to general and administrative expense. The site is
designed to and has operated as an e-commerce site for buyers and sellers of
less-costly items. The site is functional but not currently operating due to
management's focus on developing Bid4it. Management intends to utilize this site
as a secondary trade site relative to Bid4it.
The Company's shareholders completed activities necessary to form the entity and
operations. In lieu of wages, the shareholders received 2,500,000 shares of
common stock. The shares were recorded at par value with a charge to general and
administrative expense.
Note 3 - Commitments
On April 19, 1996, the Company entered into an agreement with Electronic Data
System Corporation (EDS) to license certain proprietary software. The license
agreement terminates at the earlier of April 19, 2004 or upon the Company's
payment to EDS of $350,000, including amounts related to the license of certain
technology discussed below. No royalties were owed at December 31, 1996.
Other liabilities include an amount due Electronic Data System Corporation
related to the license of certain technology used in the development of the
Bid4it web site. The amount is due in annual installments of $50,000 in 1997 and
$75,000 in 1998. The agreement was subsequently amended to extend the payments
dates to 1999 and 2000, respectively and to extend the termination date of the
license agreement to April 2006.
Note 4 - Risks and Uncertainties
The Company's results in the development, operations and servicing of the Bid4it
operations may vary significantly given the nature of the emerging but
competitive Internet market. The success of the Company will depend upon a
variety of factors not within the Company's control, such as: internet growth,
risk of internet failures, competition, changes in technology, fraud, and
government regulations.
In February 1997, the shareholders of the Company exchanged their investment in
common stock of the Company for limited partnership interests in CyberQuest,
Ltd. CyberQuest, Ltd. assumed the assets and liabilities of the Company.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) FEBRUARY 2, 1999
(NOVEMBER 19, 1998)
CBQ, INC.
(Exact name of registrant as specified in its charter)
COLORADO 33 14707 NY 84 1047159
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
4851 KELLER SPRINGS RD., SUITE 213, DALLAS, TEXAS 75246
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (972) 732 1100
FREEDOM FUNDING, INC., 1999 BROADWAY, STE. 3235, DENVER, COLORADO 80202
(Former name or formeraddress, if changed since last report.)
ITEM 1. CHANGE IN CONTROL OF REGISTRANT.
On November 19, 1998 (the Closing Date), CBQ, Inc., a Colorado corporation
formerly known as Freedom Funding, Inc. (the Company), consummated an Agreement
of Purchase (the Reorganization Agreement) dated as of the Closing Date among
the Company, CyberQuest, Inc., a Colorado corporation (CyberQuest), and the
individual stockholders of CyberQuest. The Reorganization Agreement provided for
the acquisition of all the outstanding capital stock of CyberQuest by the
Company for consideration of all the outstanding capital stock of the Company,
resulting in the complete control of the Company by the previous stockholders of
CyberQuest. On October 23, 1998, CyberQuest was formed as a result of a
Reorganization Agreement dated October 23, 1998 between CyberQuest and
CyberQuest, Ltd., a Texas limited partnership.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
See Item 1, above.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired
(1) Consolidated financial statements of CyberQuest, Ltd. for the period from
inception (February 10, 1997) to December 31, 1997.
(2) Consolidated financial statements of CBQ, Inc., a Texas corporation and the
predecessor to CyberQuest, Ltd. for the period from inception (April 6, 1995) to
December 31, 1996.
(b) Pro Forma Financial Information
Prior to the consummation of the Reorganization Agreement, the Company had no
material operations, assets or liabilities.
Reference is made to the information provided in the consolidated financial
statements regarding CyberQuest, Ltd. and CBQ, Inc. filed with this Current
Report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CBQ, Inc.
By: /s/ MICHAEL SHERIFF
Michael Sheriff
Chief Executive Officer
Date: February 5, 1999
<PAGE>
EXHIBIT INDEX
Exhibit Description
1 Agreement of Purchase dated as of November 19, 1998 among CBQ, Inc., a
Colorado corporation formerly known as Freedom Funding, Inc.,
CyberQuest, Inc., a Colorado corporation, and the individual
stockholders of CyberQuest, Inc.*
2 Series A Preferred Stock Resolutions and Provisions.*
3 Consolidated financial statements of CyberQuest, Ltd. for the eleven
month period ended December 31, 1997.*
4 Consolidated financial statements of CBQ, Inc., a Texas corporation
and predecessor of CyberQuest, Ltd. for the period from inception
(April 6, 1995) to December 31, 1996.*
* - previously filed.
<PAGE>
ARTICLE 5
<TABLE>
<S> <C>
PERIOD-TYPE 12-MOS
FISCAL-YEAR-END DEC-31-1998
PERIOD-START JAN-01-1998
PERIOD-END DEC-31-1998
CASH 97,907
SECURITIES 0
RECEIVABLES 0
ALLOWANCES 0
INVENTORY 0
CURRENT-ASSETS 97,907
PP&E 74,859
DEPRECIATION 33,960
TOTAL-ASSETS 232,230
CURRENT-LIABILITIES 221,578
BONDS 0
PREFERRED-MANDATORY 0
PREFERRED 70
COMMON 2,640
OTHER-SE (7,942)
TOTAL-LIABILITY-AND-EQUITY 232,230
SALES 0
TOTAL-REVENUES 0
CGS 0
TOTAL-COSTS 0
OTHER-EXPENSES 21,579
LOSS-PROVISION 0
INTEREST-EXPENSE 0
INCOME-PRETAX (21,579)
INCOME-TAX (21,579)
INCOME-CONTINUING (21,579)
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME (21,579)
EPS-PRIMARY (.001)
EPS-DILUTED (.001)
</TABLE>
2.a Quarterly report on Form 10QSB for three and nine month periods ended
September 30, 1999.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
Commission file number: 33 14707 NY
CBQ, INC.
---------
(Exact name of small business issuer specified in its charter)
Colorado 84 1047159
-------- ----------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
4851 Keller Springs Road Ste 228 Dallas TX 75248
------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (972) 75248
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of November 12, 1999, tther
were approximately 26,406,532 shares outstanding.
<PAGE>
I. PART I FINANCIAL INFORMATION
Item 1. Financial Statements
CBQ, Inc.
(Formerly FREEDOM FUNDING, INC.)
(a development stage company)
BALANCE SHEETS
September 30, December 31,
1999 1998
---- ----
(Unaudited) (Audited)
Assets:
Current Assets:
Cash $ 91,979 $ 97,907
Accounts Receivable 15,332 --
Other Current Assets 7,258 4,998
--------- ---------
Total Current Assets $ 114,569 $ 102,905
Equipment, at cost (Net at Sep 30):
Computers and related Equipment 279,744 68,905
Furniture and fixtures 27,339 5,954
Software 185,923 --
--------- ---------
493,006 74,859
Less accumulated depreciation 218,459 38,960
--------- ---------
274,547 35,899
Other assets (net):
bid4it technology 28,125 37,500
Other investments 1,000 --
Organization costs 3,485 667
Goodwill 353,303 48,000
Deposits 300 7,259
--------- ---------
Total Assets $ 775,329 $ 232,230
========= =========
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable $ 231,425 $ 105,918
Accrued royalties 50,000 79,382
Accrued expense, other 41,704 31,203
Deferred revenues 52,121 --
Deposit 2,500 2,500
Officer advances -- 2,575
Sales Tax Payable 9,655 --
--------- ---------
Total Current Liabilities $ 387,405 $ 221,578
========= =========
Long-term liabilities
Notes Payable to Bank 28,865 --
Royalties 79,382 --
Notes to shareholders 134,062 --
Total Long-term liabilities 242,309 --
========= =========
Stockholders' Equity:
Preferred stock, 70,000
Shares issued 70 70
Common stock, 20,275,332
Issued at Dec 31, 26,406,532
issued at Sep 30 4,153 2,640
Additional paid-in capital 579,201 209,682
Accumulated deficit (456,386) (201,740)
--------- ---------
Total stockholders' equity (deficit) 145,615 10,652
--------- ---------
Total liabilities and stockholders'
equity (deficit) $ 775,329 $ 232,230
========= =========
See accompanying Notes to Financial Statements
<PAGE>
CBQ, Inc.
(Formerly FREEDOM FUNDING, INC.)
(a development stage company)
STATEMENTS OF OPERATIONS
Three Months Ended September 30
1999 1998
---- ----
Revenues $ 284,636 $ --
Costs and expenses
Costs of revenues 80,099 --
Sales and Marketing -- --
General and Administrative 258,399 --
Depreciation and Amoritization 25,455 --
Interest expense -- --
------------ ------------
363,953 --
Net income (loss) (79,317) --
Net income (loss) per common share * *
Weighted average number of common
shares outstanding 26,406,532 ,075,325
*Less than $.01 per share
Nine Months Ended June 30
1999 1998
---- ----
Revenues $ 483,164 $ --
Costs and expenses
Costs of revenues 122,103 --
Sales and Marketing 19,070 --
General and Administrative 511,245 --
Depreciation and Amoritization 72,019 --
Interest expense 1,847 --
------------ ---------
726,284 --
Net income (loss) (243,120) --
Net income (loss) per common share * *
Weighted average number of common
shares outstanding 26,406,532 2,075,325
*Less than $.01 per share
See accompanying Notes to Financial Statements
<PAGE>
CBQ, Inc.
(Formerly FREEDOM FUNDING, INC.)
(a development stage company)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended June 30,
1999 1998
---- ----
OPERATING ACTIVITIES:
Net (loss) (243,120) --
Adjustments necessary to reconcile net loss
to net cash used in operating activities:
Depreciation and amortiziation 72,019 --
Increase in accounts receivable (15,332) --
Increase in other current assets (2,260) --
Decrease in deposits receivable 7,259 --
Increase in accounts payable (52,962) --
Increase in royalties payable 50,000 --
Increase in other accured expenses 10,501 --
Increase in deferred revenues 7,434 --
Decrease in officer advances (2,574)
Increase in sales tax payable 9,655 --
Net cash used in operating activities ( 53,457) --
INVESTING ACTIVITIES:
Net assets acquired in acquisition of
Reliance technologies, Inc. (261,178) --
Net assets acquired in acquisition of
Priority One Electronic Commerce Corp. (104,026) --
Investment in Global Logistics Partners, LLC (1,000) --
--------- --
Net cash used in investing activities (366,204) --
FINANCING ACTIVITIES:
Restricted common stock issued in
acquisition of Reliance Technologies 261,743 --
Restricted common stock issued in
acquisition of Priority One Electronic
Commerce Corp. 104,026 --
Restricted common stock issued in
acquisition of Global Logistics Partners, LLC 1,000 --
Loans from shareholders 52,771 --
Repayment of notes payables (5,807) --
--------- --
Net cash provided by financing activities 413,733 --
--------- --
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ( 5,928) --
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 97,907 --
--------- --
END OF PERIOD $ 91,979 --
========= ==
<PAGE>
CBQ, Inc.
(Formerly FREEDOM FUNDING, INC.)
(a development stage company)
Notes to Financial Statements
September 30, 1999
(Unaudited)
Basis of Presentation: In the opinion of management of CBQ, Inc. (CBQI or the
Company), the accompanying consolidated financial statements, which have not
been audited by independent certified public accountants, contain all
adjustments necessary to present fairly the Company's consolidated financial
position, results of its operations and its cash flows for the periods reported.
The consolidated financial statements contain the accounts of the Company and
its subsidiaries. The st atement of operations reflects the results of Reliance
Technologies, Inc., and its subsidiaries for the period from March 15, 1999
(date of acquisition) to September 30, 1999; and the results of Priority One
Electronic Commerce Corp. (Priority One) for the period from April 9, 1999 (date
of acquisition) to September 30, 1999. All significant intercompany balances and
transactions have been eliminated. The results of operations are not necessarily
indicative of the results to be expec ted for a full year.
Note 1. Organization and Nature of Business. CBQ, Inc. (Formerly Freedom Funding
Inc.) A Colorado corporation, was incorporated September 18, 1986, under the
laws of the State of Delaware, and changed its situs to Colorado in 1989. Since
inception, the Company has been in the development stage. The Company's primary
intended activitiy is to engage in all aspects of review and evaluation of
private companies, partnerships or sole proprietorships for the purpose of
completing mergers or acquisitions with the Company, and to engage in mergers
and acquisition with any or all varieties of private entities. On November 18,
1998, the Company acquired a wholly owned subsidiary, CyberQuest, Inc., which
had recently purchased the assets and business of CyberQuest, Ltd. The Company
on March 15, 1999, acquired all of the outstanding shares of Reliance
Technologies, Inc., a privately held Texas corporation (Reliance), in a tax free
exchange. Reliance was acquired solely for the issuance of 1,000,000 restricted
common shares of the Company. The Company on April 9, 1999, acquired all of the
outstanding shares of Priority One Electronic Commerce Corp., a privately held
Pennsylvania corporation (Priority One), in a tax free exchange. Priority One
was acquired solely for the issuance of 900,000 restricted common shares of the
Company. As a result of these acquisitions, the Company is now a full service
Internet development company, specializing in developing, implementing and
maintaining creative business Web Sites, Commercial Sites and Database
Development.
CyberQuest has also developed a straight forward method that frees small
business from having to integrate and develop significant amounts of software
and manage the internet site.
The Company's internet sites, goodstuffcheap, bid4it and shop4it.com allow
clients to place their products and services on the internet quickly and
inexpensively and to begin transacting commerce over the net.
Note 2. A summary of significant accounting policies is currently on file with
the U.S. Securities and Exchange Commission in registrant's previous flings
under the Exchange Act.
Note 3. The loss per share was computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the period.
Note 4. Registrant has not declared or paid dividends on its common shares since
inception.
Note 5. The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10 QSB and do not include
all information and footnotes required by generally accepted accounting
prinicples for complete financial statements.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This report contains certain forward looking statements with respect to the
Company's operations, financial condition and liquidity. These statements
reflect management's best assessment of a number of risks and uncertainties. The
Company's results could differ materially from the results anticipated in these
forward looking statements as a result of a number of factors described in this
report and other risks described in the Company's other filings with the
Securities and Exchange Commission.
Results of Operations: The Company had no operations until the fourth quarter of
1998 when it acquired CyberQuest, as previously reported. Accordingly, the
Company had no operations in the first, second or third quarters of 1998 to
compare with the operations of the corresponding quarter or year to date of the
current year. On March 15, 1999, the Company aqcuired all of the outstanding
shares of Reliance in a tax free exchange for 1,000,000 shares of common stock.
On April 9, 1999, the Company acquired all of the outstanding shares of Priority
One in a tax free exchange for 900,000 common shares of the Company.
Revenues for the third quarter of 1999 amounted to $284,636, which was
attributed to the income realized from consulting fees and charges for providing
internet commerce services by Reliance and Priority One. Costs of revenues of
$105,554 were incurred by Reliance and Priority One in connection with their
operations. General and administrative expenses of $258,339 included salaries,
the cost of operating offices in Texas and Pennsylvania and legal and
professional fees.
Revenues for the nine months ended June 30, 1999, amounted to $483,164, which
was attributed to the income realized from consulting fees and charges for
providing internet commerce services by Reliance and Priority One. Costs of
revenues of $215,039 were incurred by Reliance and Priority One in connection
with their operations as an internet service provider. Sales and marketing
expenses of $19,070 were incurred by the Company and its subsidiaries in
promoting their various activities in the area of internet auctions and internet
services. General and administrative expenses amounted to $511,245, which
included salary expenses, the expenses of running the Company's offices in Texas
and Pennsylvania and legal and professional fees.
In connection with the acquisition of Priority One, the Company engaged the
president of that entity, Mr. Sidney Lieberman, as a consultant. Mr. Lieberman,
in accordance with the terms of his consulting agreement, was granted an option
to acquire 100,000 common shares of the Company at the market price therefor on
the date of closing, which was then $3.00 per share. The common shares which the
Company optioned to Mr. Lieberman upon exercise of his option will be registered
under the Securities Act of 1933. Mr. Liberman also serves on the board of
directors for the Company.
On May 11, 1999, the Company acquired 19% of the outstanding interest of Global
Logistics Partners, LLC, a privately held Texas limited liability company (GLP)
in a tax fee exchange. This interest was acquired solely for the issuance of
4,233,200 common shares. Concurrently with the closing, Mr. Richard Williamson
assumed the positions of Chairman of the Board of Directors, CEO and President
of the Company, and GLP assumed day to day operational control of the Company.
During the period of this report, Mr. Williamson resigned and new officers were
appointed, as well as new directors to fill vacancies. The Company has now
initiated discussions with Mr. Williamson to rescind the acquisition of GLP and
obtain the return of the shares issued by the Company to treasury.
Liquidity: The Company has not generated material cash flows from operating or
investing activities since inception. Operating capital was primarily provided
from inception through 1987 from the proceeds of an initial funding prior to a
public offering and then from the public offering itself. The Company was then
extended credit through a former officer and director, all of which was
subsequently converted to common stock. The Company, during the period at issue,
received proceeds from loans from certain shareholders. During the latter part
of the second quarter of 1999, the Company acquired its interest in GLP and GLP
agreed to provide managerial support to the Company and to use its best efforts
to perpetuate the business of the Company; however, the Company believes that
GLP failed to meet its obligations in this regard.
<PAGE>
PART II OTHER INFORMATION
Item 1. Litigation: No material legal proceedings to which the Company (or any
officer or director of the Company, or any affiliate or owner of record or
beneficially of more than five percent of the Common Stock, to management's
knowledge) is a party or to which the property of the Company is subject is
pending and no such material proceeding is known by management of the Company to
be contemplated.
Item 2. Change in Securities: This item is not applicable to the Company for the
period covered by this report.
Item 3. Defaults Upon Senior Securities: This item is not applicable to the
Company for the period covered by this report.
Item 4. Submission of Matters to a Vote of Security Holders: There were no
meetings of security holders during the period covered by this report; thus,
this item is not applicable.
Item 5. Other Information: There is no additional information which the Company
is electing to report under this item at this time.
Item 6. Exhibits and Reports on Form S K: No reports on Form 8 K were filed by
the Company during the period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized this 12th day of November,
1999.
CBQ Inc.
(Registrant)
By: /s/ John Harris
- -------------------------------------
John Harris, Chief Executive Officer
By: /s/ Greg Allen
- -------------------------------------
Greg Allen, Chief Financial
and Accounting Officer and Treasurer
<PAGE>
ARTICLE> 5
<TABLE>
<S> <C>
PERIOD-TYPE 9-MOS
FISCAL-YEAR-END DEC-31-1999
PERIOD-START JAN-01-1999
PERIOD-END SEP-30-1999
CASH 91,979
SECURITIES 0
RECEIVABLES 15,332
ALLOWANCES 0
INVENTORY 0
CURRENT-ASSETS 114,569
PP&E 493,006
DEPRECIATION 218,459
TOTAL-ASSETS 775,329
CURRENT-LIABILITIES 387,405
BONDS 0
PREFERRED-MANDATORY 0
PREFERRED 70
COMMON 4,153
OTHER-SE 141,392
TOTAL-LIABILITY-AND-EQUITY 145,615
SALES 483,164
TOTAL-REVENUES 483,164
CGS 215,039
TOTAL-COSTS 726,284
OTHER-EXPENSES 0
LOSS-PROVISION 0
INTEREST-EXPENSE 0
INCOME-PRETAX (243,120)
INCOME-TAX (243,120)
INCOME-CONTINUING (243,120)
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME (243,120)
EPS-PRIMARY (.001)
EPS-DILUTED (.001)
</TABLE>
Exhibit 2.b. Quarterly report on Form 10QSB for three and six month periods
ended June 30, 1999.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
Commission file number: 33 14707 NY
CBQ, INC.
---------
(Exact name of small business issuer specified in its charter)
Colorado 84 1047159
-------- ----------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
4851 Keller Springs Road Ste 228 Dallas TX 75248
------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (972) 75248
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of August 10, 1999, there
were approximately 26,406,532 shares outstanding.
<PAGE>
I. PART I FINANCIAL INFORMATION
Item 1. Financial Statements
CBQ, Inc.
(Formerly FREEDOM FUNDING, INC.)
(a development stage company)
BALANCE SHEETS
June 30, December 31,
1999 1998
---- ----
(Unaudited) (Audited)
Assets:
Current Assets:
Cash $ 18,378 $ 97,907
Accounts Receivable 40,813 --
Other Current Assets 7,258 4,998
--------- ---------
Total Current Assets $ 66,449 $ 102,905
Equipment, at cost (Net at June 30):
Computers and related Equipment 277,016 68,905
Furniture and fixtures 25,761 5,954
Software 185,923 --
--------- ---------
488,700 74,859
Less accumulated depreciation 193,484 38,960
--------- ---------
295,216 35,899
Other assets (net):
bid4it technology 28,125 37,500
Other investments 1,000 --
Orgaization costs 3,965 667
Goodwill 353,303 48,000
Deposits 300 7,259
--------- ---------
Total Assets $ 745,358 $ 232,230
========= =========
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable $ 211,871 $ 105,918
Accrued royalties 50,000 79,382
Accrued expense, other 21,489 31,203
Deferred revenues 52,121 --
Deposit 2,500 2,500
Officer advances -- 2,575
Sales Tax Payable 7,624 --
--------- ---------
Total Current Liabilities $ 345,605 $ 221,578
========= =========
Long-term liabilities
Notes Payable to Bank 10,322 --
Royalties 79,382 --
Notes to shareholders 92,168 --
Total Long-term liabilities 181,872 --
========= =========
Stockholders' Equity:
Preferred stock, 70,000
Shares issued 70 70
Common stock, 20,275,332
Issued at December 31, 26,406,532
issued at June 30 4,153 2,640
Additional paid-in capital 579,201 209,682
Accumulated deficit (365,543) (201,740)
--------- ---------
Total stockholders' equity (deficit) 217,881 10,652
--------- ---------
Total liabilities and stockholders'
equity (deficit) $ 745,358 $ 232,230
========= =========
See accompanying Notes to Financial Statements
<PAGE>
CBQ, Inc.
(Formerly FREEDOM FUNDING, INC.)
(a development stage company)
STATEMENTS OF OPERATIONS
Three Months Ended June 30
1999 1998
---- ----
Revenues $ 179,676 $ --
Costs and expenses
Costs of revenues 34,772 --
Sales and Marketing -- --
General and Administrative 146,783 --
Depreciation and Amoritization 25,355 --
Interest expense -- --
------------ ------------
206,910 --
Net income (loss) (27,234) --
Net income (loss) per common share * *
Weighted average number of common
shares outstanding 24,363,627 2,075,325
*Less than $.01 per share
Six Months Ended June 30
1999 1998
---- ----
Revenues $ 198,528 $ --
Costs and expenses
Costs of revenues 42,004 --
Sales and Marketing 19,070 --
General and Administrative 252,846 --
Depreciation and Amoritization 46,564 --
Interest expense 1,847 --
------------ ------------
363,331 --
Net income (loss) (163,803) --
Net income (loss) per common share * *
Weighted average number of common
shares outstanding 22,832,044 2,075,325
*Less than $.01 per share
See accompanying Notes to Financial Statements
<PAGE>
CBQ, Inc.
(Formerly FREEDOM FUNDING, INC.)
(a development stage company)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
1999 1998
---- ----
OPERATING ACTIVITIES:
Net (loss) (163,803) --
Adjustments necessary to reconcile net loss
to net cash used in operating activities:
Depreciation and amortiziation 46,564 --
Increase in accounts receivable (44,789) --
Increase in other current assets (2,260) --
Decrease in deposits receivable 7,259 --
Increase in accounts payable (28,452) --
Increase in royalties payable 50,000 --
Increase in other accured expenses 1,140 --
Increase in deferred revenues 7,434 --
Decrease in officer advances (2,574)
Increase in sales tax payable 4,102 --
Net cash used in operating activities (125,380) --
INVESTING ACTIVITIES:
Net assets acquired in acquisition of
Reliance technologies, Inc. (261,178) --
Net assets acquired in acquisition of
Priority One Electronic Commerce Corp. (104,026) --
Investment in Global Logistics Partners, LLC (1,000) --
--------- --
Net cash used in investing activities (366,204) --
FINANCING ACTIVITIES:
Restricted common stock issued in
acquisition of Reliance Technologies 261,743 --
Restricted common stock issued in
acquisition of Priority One Electronic
Commerce Corp. 104,026 --
Restricted common stock issued in
acquisition of Global Logistics Partners, LLC 1,000 --
Loans from shareholders 49,516 --
Repayment of notes payables (4,230) --
--------- --
Net cash provided by financing activities 412,055 --
--------- --
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (79,529) --
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 97,907 --
--------- --
END OF PERIOD $ 18,378 --
========= ==
<PAGE>
CBQ, Inc.
(Formerly FREEDOM FUNDING, INC.)
(a development stage company)
Notes to Financial Statements
June 30, 1999
(Unaudited)
Basis of Presentation: In the opinion of management of CBQ, Inc. (CBQI or the
Company), the accompanying consolidated financial statements, which have not
been audited by independent certified public accountants, contain all
adjustments necessary to present fairly the Company's consolidated financial
position, results of its operations and its cash flows for the periods reported.
The consolidated financial statements contain the accounts of the Company and
its subsidiaries. The statement of operations reflects the results of Reliance
Technologies, Inc., and its subsidiaries for the period from March 15, 1999
(date of acquisition) to June 30, 1999; and the results of Priority One
Electronic Commerce Corp. (Priority One) for the period from April 9, 1999 (date
of acquisition) to June 30, 1999. All significant intercompany balances and
transactions have been eliminated. The results of operations for the three and
six months ened June 30, 1999 and 1998 are not necessarily indicative of the
results to be expected for a full year.
Note 1. Organization and Nature of Business. CBQ, Inc. (Formerly Freedom Funding
Inc.) A Colorado corporation, was incorporated September 18, 1986, under the
laws of the State of Delaware, and changed its situs to Colorado in 1989. Since
inception, the Company has been in the development stage. The Company's primary
intended activitiy is to engage in all aspects of review and evaluation of
private companies, partnerships or sole proprietorships for the purpose of
completing mergers or acquisitions with the Company, and to engage in mergers
and acquisition with any or all varieties of private entities. On November 18,
1998, the Company acquired a wholly owned subsidiary, CyberQuest, Inc., which
had recently purchased the assets and business of CyberQuest, Ltd. The Company
on March 15, 1999, acquired all of the outstanding shares of Reliance
Technologies, Inc., a privately held Texas corporation (Reliance), in a tax free
exchange. Reliance was acquired solely for the issuance of 1,000,000 restricted
common shares of the Company. The Company on April 9, 1999, acquired all of the
outstanding shares of Priority One Electronic Commerce Corp., a privately held
Pennsylvania corporation (Priority One), in a tax free exchange. Priority One
was acquired solely for the issuance of 900,000 restricted common shares of the
Company. As a result of these acquisitions, the Company is now a ful service
Internet development company, specializing in developing, implementing and
maintaining creative business Web Sites, Commercial Sites and Database
Development.
CyberQuest has also developed a straight forward method that frees small
business from having to integrate and develop significant amounts of software
and manage the internet site.
<PAGE>
The Company's internet sites, goodstuffcheap, bid4it and shop4it.com allow
clients to place their products and services on the internet quicly and
inexpensively and to begin transacting commerce over the net.
Note 2. A summary of significant accounting policies is currently on file with
the U.S. Securities and Exchange Commission in registrant's previous flings
under the Exchange Act.
Note 3. The loss per share was computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the period.
Note 4. Registrant has not declared or paid dividends on its common shares since
inception.
Note 5. The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10 QSB and do not include
all information and footnotes required by generally accepted accounting
prinicples for complete financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This report contains certain forward looking statements with respect to the
Company's operations, financial condition and liquidity. These statements
reflect management's best assessment of a number of risks and uncertainties. The
Company's results could differ materially from the results anticipated in these
forward looking statements as a result of a number of factors described in this
report and other risks described in the Company's other filings with the
Securities and Exchange Commission.
Results of Operations: The Company had no operations until the fourth quarter of
1998, when it acquired CyberQuest, as previously reported. Accordingly, there
were no operations in the first or second quarter of 1998 to compare with the
operations of the corresponding quarter or year to date of the current year. On
March 15, 1999, the Company acuired all of the outstanding shares of Reliance in
a tax free exchange for 1,000,000 shares of common stock. On April 9, 1999, the
Company acquired all of the outstanding shares of Priority One in a tax free
exchange for 900,000 common shares of the Company.
Revenues for the second quarter of 1999 amounted to $179,676, which was
attributed to the income realized from consulting fees and charges for providing
internet commerce services by Reliance and Priority One. Costs of revenues of
$34,772 were incurred by Reliance and Priority One in connection with their
operations. General and administrative expenses of $146,783 included salaries,
the cost of operating offices in Texas and Pennsylvania and legal and
professional fees.
<PAGE>
Revenues for the six months ended June 30, 1999, amounted to $198,528, which was
attributed to the income realized from consulting fees and charges for providing
internet commerce services by Reliance and Priority One. Costs of revenues of
$42,004 were incurred by Reliance and Priority One in connection with their
operations as an internet service provider. Sales and marketing expenses of
$19,070 were incurred by the Comany and its subsidiaries in promoting their
various activities in the area of internet auctions and internet services.
General and administrative expenses amounted to $252,846, which included salary
expenses, the expenses of running the Company's offices in Texas and
Pennsylvania and legal and professional fees.
In connection with the acquisition of Priority One, the Company engaged the
president of that entity, Mr. Sidney Lieberman, as a consultant. Mr. Lieberman,
in accordance with the terms of his consulting agreement, was granted an option
to acquire 100,000 common shares of the Company at the market price therefor on
the date of closing, which was then $3.00 per share. The common shares which the
Company optioned to Mr. Lieberman upon exercise of his option will be registered
under the Securities Act of 1933. Mr. Liberman also serves on the board of
directors for the Company.
On May 11, 1999, the Company acquired 19% of the outstanding interest of Global
Logistics Partners, LLC, a privately held Texas limited liability company (GLP)
in a tax fee exchange. This interest was acquired solely for the issuance of
4,233,200 common shares. Concurrently with the closing, Mr. Richard Williamson
assumed the positions of Chairman of the Board of Directors, CEO and President
of the Company, and GLP assumed day to day operational control of the Company.
After the period of this report, Mr. Williamson resigned and new officers were
appointed, as well as new directors to fill vacancies.
Liquidity: The Company has not generated material cash flows from operating or
investing activities since inception. Operating capital was primarily provided
from inception through 1987 from the proceeds of an initial funding prior to a
public offering and then from the public offering itself. These Company was then
extended credit through a former officer and director, all of which was
subsequently converted to common stock. The Company, during the period at issue,
received proceeds from loans from certain shareholders. During the latter part
of the period covered by this report, the Company acquired its interest in GLP
and GLP agreed to provide managerial support to the Company and to use its best
efforts to perpetuate the business of the Company.
<PAGE>
PART II OTHER INFORMATION
Item 1. Litigation: No material legal proceedings to which the Company (or any
officer or director of the Company, or any affiliate or owner of record or
beneficially of more than five percent of the Common Stock, to management's
knowledge) is a party or to which the property of the Company is subject is
pending and no such material proceeding is known by management of the Company to
be contemplated.
Item 2. Change in Securities: This item is not applicable to the Company for the
period covered by this report.
Item 3. Defaults Upon Senior Securities: This item is not applicable to the
Company for the period covered by this report.
Item 4. Submission of Matters to a Vote of Security Holders: There were no
meetings of security holders during the period covered by this report; thus,
this item is not applicable.
Item 5. Other Information: There is no additional information which the Company
is electing to report under this item at this time.
Item 6. Exhibits and Reports on Form S K: No reports on Form 8 K were filed by
the Company during the period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized this 13th day of August,
1999.
CBQ Inc.
(Registrant)
By: /s/ Charles Stidham
- -----------------------
Charles Stidham, President
and Chief Executive Officer
By: /s/ Greg Allen
- ------------------
Greg Allen, Chief Financial
and Accounting Officer and Treasurer
<PAGE>
ARTICLE 5
<TABLE>
<S> <C>
PERIOD-TYPE 6-MOS
FISCAL-YEAR-END DEC-31-1999
PERIOD-START JAN-01-1999
PERIOD-END JUN-30-1999
CASH 18,378
SECURITIES 0
RECEIVABLES 40,813
ALLOWANCES 0
INVENTORY 0
CURRENT-ASSETS 66,449
PP&E 488,700
DEPRECIATION 193,484
TOTAL-ASSETS 745,358
CURRENT-LIABILITIES 345,605
BONDS 0
PREFERRED-MANDATORY 0
PREFERRED 70
COMMON 4,153
OTHER-SE 213,658
TOTAL-LIABILITY-AND-EQUITY 745,358
SALES 198,528
TOTAL-REVENUES 198,528
CGS 42,004
TOTAL-COSTS 42,004
OTHER-EXPENSES 321,327
LOSS-PROVISION 0
INTEREST-EXPENSE 1,847
INCOME-PRETAX 0
INCOME-TAX (163,803)
INCOME-CONTINUING (163,803)
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME (168,803)
EPS-PRIMARY (.001)
EPS-DILUTED (.001)
</TABLE>
Exhibit 2.c Quarterly report on Form 10QSB for three month period ended march
31, 1999.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________________ to __________________
Commission file number: 33-14707-NY
CBQ, INC.
---------
(Exact name of small business issuer as specified in its charter)
Colorado 84-1047159
- -------------------------------- ---------------------
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
6300 Ridgelea Place, Ste. 600 76116
- --------------------------------------- ------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (817) 737-6100
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of May 24, 1999, there were
approximately 26,406,532 shares outstanding.
<PAGE>
I. PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CBQ, Inc. and Subsidiary
(formerly FREEDOM FUNDING, INC.)
(a development stage company)
BALANCE SHEETS
March 31, December 31,
1999 1998
---- ----
(Unaudited)
Assets:
Current Assets:
Cash $ 22,418 $ 97,907
Accounts Receivable 9,898 --
Other Current Assets 7,258 4,998
--------- ---------
Total Current Assets $ 39,574 $ 102,905
Equipment, at cost (net at March 31)
Computers and related equipment 212,206 68,905
Furniture and fixtures 8,214 5,954
Software 5,289 --
--------- ---------
225,709 74,859
Less accumulated depreciation 65,960 38,960
--------- ---------
159,749 35,899
Other assets (net):
bid4it technology, 28,125 37,500
Organization costs 3,965 667
Goodwill 297,053 48,000
Deposits -- 7,259
--------- ---------
Total Assets $ 528,466 $ 232,230
========= =========
Liabilities and Stockholders' Equity :
Current Liabilities:
Accounts payable 104,273 $ 105,918
Accrued royalties 50,000 79,382
Accrued expenses, other 13,870 31,203
Deferred revenues 52,121 --
Deposit 2,500 2,500
Officer Advances -- 2,575
Sales Tax Payable 2,581 --
--------- ---------
Total Current Liabilities $ 225,345 $ 221,578
========= =========
Long-term liabilities:
Notes Payable to Bank 14,026 --
Royalties 79,382 --
Notes to shareholders 73,887 --
--------- ---------
Total Long-term liabilities 167,295 --
========= =========
Stockholders' Equity:
Preferred stock, 70,000 shares issued 70 70
Common stock, issued 20,275,332 3,640 2,640
issud at December 31, 21,275,332
issued at March 31
Additional paid-in capital 470,425 209,682
Accumulated deficit (338,309) (201,740)
--------- ---------
Total stockholders' equity (deficit) (135,826) 10,652
--------- ---------
Total liabilities and stockholders'
equity (deficit) $ 528,466 $ 232,230
========= =========
See accompanying Notes to Financial Statements
<PAGE>
CBQ, Inc. and Subsidiary
(formerly FREEDOM FUNDING, INC.)
(a development stage company)
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
-------------------------------
1999 1998
---- ----
Revenues $ 18,852 $ --
Costs and expenses
Costs of revenues 7,232 --
Sales and marketing 19,070 --
General and administrative 106,063 --
Depreciation and amortization 21,209 --
Interest expense 1,847 --
------------ ------------
155,421 --
Net income (loss) (136,569) --
Net income (loss) per common share * *
Weighted average number of
common shares outstanding 20,278,432 2,075,325
* Less than $.01 per share
See accompanying Notes to Financial Statements
<PAGE>
CBQ, Inc. and Subsidiary
(formerly FREEDOM FUNDING, INC.)
(a development stage company)
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
----------------------------
1999 1998
---- ----
OPERATING ACTIVITIES:
Net (loss) (136,569) --
Adjustments necessary to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 21,209 --
Increase in accounts receivable (2,075) --
Increase in other current assets (2,260) --
Decrease in deposits receivable 7,259 --
Decrease in accounts payable (23,043) --
Increase in royalties payable 50,000 --
Decrease in other accrued expenses (24,322) --
Increase in deferred revenues 7,434 --
Decrease in officer advances (2,575) --
Decrease in sales tax payable (941) --
--------- --
Net cash used in operating activities (105,883) --
INVESTING ACTIVITIES:
Net assets acquired in acquisition of
Reliance Technologies, Inc. (261,178) --
--------- --
Net cash used in operating activities (261,178)
FINANCING ACTIVITIES:
Restricted common stock issued in
acquisition of Reliance Technologies 261,743 --
Loans from shareholders 30,355 --
Repayment of notes payable (526) --
--------- --
Net cash used in operating activities 291,572 --
--------- --
NET INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS (75,489) --
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 97,907 --
--------- --
END OF PERIOD $ 22,418 --
========= ==
See accompanying Notes to Financial Statements
<PAGE>
CBQ, Inc. and Subsidiary
(formerly FREEDOM FUNDING, INC.)
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
Basis of Presentation: In the opinion of management of CBQ, Inc. (CBQI or the
Company), the accompanying consolidated financial statements, which have not
been audited by independent certified public accounts, contain all adjustments
necessary to present fairly the Company's consolidated financial position,
results of its operations, and its cash flows for the periods reported. The
consolidated finanial statements contain the accounts of the Company and its
subsidiaries. The statement of operations reflects the results of Reliance
Technologies, Inc., and its subsidiaries for the period from March 15, 1999
(date of acquisition) to March 31, 1999. All significant intercompany balances
and transactions have been eliminated. The results of operations for the three
months ended March 31, 1999 and 1998 are not necessarily indicative of the
results to be expected for a full year.
Note 1. Organization and Nature of Business: CBQ, Inc., (formerly Freedom
Funding, Inc.) a Colorado corporation, was incorporated September 18, 1986,
under the laws of the State of Delaware, and changed its situs to Colorado in
1989. Since inception, the Company has been in the development stage. The
Company's primary intended activity is to engage in all aspects of review and
evaluation of private companies, partnerships or sole proprietorships for the
purpose of completing mergers or acquisitions with the Company, and to engage in
mergers and acquisitions with any or all varieties of private entities. On
November 18, 1999, the Company acquired a wholly-owned subsidiary, CyberQuest,
Inc., which had recently purchased the assets and business of CyberQuest, Ltd.
The Company on March 15, 1999, acquired all of the outstanding shares of
Reliance Technologies, Inc., a privately-held Texas corporation (Reliance), in a
tax free exchange. Reliance was acquired solely for the issuance of 1,000,000
restricted common shares of the Company. A a result of these acquisitions, the
Company is now a full service internet development company, specializing in
developing, implementing and maintaining creative business WebSites, Commercial
Sites and Database Development.
CyberQuest has also developed a straight forward method that frees small
business from having to integrate and develop significant amounts of software
and manage the internet site. The Company's internet sites, goodstuffcheap,
bid4it and shop4it.com allow clients to place their products and services on the
Internet quickly and inexpensively and to begin transacting commerce over the
Net.
Note 2. A summary of significant accounting policies is currently on file with
the U.S. Securities and Exchange Commission in registrant's previous filings
under the Exchange Act.
Note 3. The loss per share was computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the period.
Note 4. Registrant has not declared or paid dividends on its common shares since
inception.
Note 5. The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not include all
information and footnotes required by generally accepted accounting principles
for complete financial statements.
Note 6. Income taxes have not been provided for in that registrant has not had a
tax liability from inception through the date of this filing, due to operating
losses.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This report contains certain forward-looking statements with respect to the
Company's operations, financial condition and liquidity. These statements
reflect management's best assessment of a number of risks and uncertainties. The
Company's results could differ materially from the results anticipated in these
forward looking statements as a result of a number of factors described in this
report and other risks described in the Company's other filings with the
Securities and Exchange Commission.
Results of Operations: The Company had no operations until the fourth quarter of
1998, when it acquired CyberQuest, as previously reported. Accordingly, there
were no operations in the first quarter of 1998 to compare with the operations
of the corresponding quarter of the current year. On March 15, 1999, the Company
acquired all of the outstanding shares of Reliance Technologies, Inc., a
privately-held Texas corporation ("Reliance"), in a tax free exchange. Reliance
was acquired solely for the issuance of 1,000,000 "restricted" common shares of
the Company. Revenues for the first three months of 1999 amounted to $18,852,
which was entirely attributed to the operations of Reliance from March 15, 1999,
through March 31, 1999. This income was realized from consulting fees and
charges for providing internet services. Costs of revenues of $7,232 were
primarily incurred by Reliance and its subsidiary in connection with its
operations as an internet service provider. Sales and marketing expenses of
$19,070 were incurred by the Company and its subsidiaries in promoting their
various activities in the area of internet auctions and internet services.
General and administrative expenses amounted to $106,063, which included salary
expenses, the expenses of running the Company's office in Dallas, and legal and
professional fees.
On 14, 1999, the Company acquired all of the outstanding shares of Priority One
Electronic Commerce Corporation, a privately-held Pennsylvanian corporation
("POECC"), in a tax free exchange. POECC was acquired solely for the issuance of
900,000 "restricted" common shares of the Company. Concurrently with the
closing, the Company engaged the president of POECC, Mr. Sidney Lieberman, as a
consultant. Mr. Lieberman, in accordance with the terms of his consulting
agreement was granted an option to acquire 100,000 common shares of the Company
at the market price therefor on the date of closing, which was then$3.00 per
share. The common shares which the Company optioned to Mr. Lieberman upon
exercise of his option will be registered under the Securities Act of 1933. Mr.
Lieberman also serves on the board of directors for the Company.
On May 11, 1999, the Company acquired 19% of the outstanding interest of Global
Logistics Partners, LLC, a privately-held Texas limited liability company
("GLP"), in a tax free exchange. This interest was acquired solely for the
issuance of 4,233,200 "restricted" common shares of the Company. Concurrenty
with the closing, Mr. Richard Williamson assumed the positions of Chairman of
the Board of Directors, CEO and President of the Company, and GLP assumed
operational control of the Company.
Liquidity: The Company has not generated material cash flows from operating or
investing activities since inception. Operating capital was primarily provided
from inception through 1987 from the proceeds of an initial funding prior to a
public offering and then from the public offering itself. The Company then was
extended credit through a former officer and director, all of which was
subsequently converted to common stock. The Company, during the period at issue,
received proceeds from loans from certain shareholders. After the period covered
by this report, the Company acquired its interest in GLP and GLP agreed to
provide managerial support to the Company and to use its best efforts to
perpetuate the business of the Company.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Litigation: No material legal proceedings to which the Company (or any
officer or director of the Company, or any affiliate or owner of record or
beneficially of more than five percent of the Common Stock, to management's
knowledge) is a party or to which the property of the Company is subject is
pending and no such material proceeding is known by management of the Company to
be contemplated.
Item 2. Change in Securities: This item is not applicable to the Company for the
period covered by this report.
Item 3. Defaults Upon Senior Securities: This item is not applicable to the
Company for the period covered by this report.
Item 4. Submission of Matters to a Vote of Security Holders: There were no
meetings of security holders during the period covered by this report; thus,
this item is not applicable.
Item 5. Other Information: There is no additional information which the Company
is electing to report under this item at this time.
Item 6. Exhibits and Reports on Form S-K: No reports on Form 8-K were filed by
the Company during the period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized this 24th day of May, 1999.
CBQ, INC.
(Registrant)
By: /s/ Richard Williamson
- --------------------------
Richard Williamson, President and
Chief Executive Officer
By: /s/ Robert W. Hampton
- --------------------------
Robert W. Hampton,Chief Financial
and Accounting Officer and Treasurer
<PAGE>
Exhibits:
- ---------
10.1 Reliance Acquisition Contract
10.2 Priority One Acquisition Contract
10.3 Global Logistics Partners Acquisition Contract
Exhibit 10.2
(Priority One Acquisition Contract)
PLAN AND AGREEMENT OF REORGANIZATION
under
SECTION 368(b) of the Internal Revenue Code
THIS AGREEMENT has been made and entered into this 9th day of April, 1999
(Closing Date), and is by and between, on the first part, CBQ, Inc., a publicly
held and traded Colorado corporation (CBQI), and, on the second part, Priority
One Electronic Commerce Corporation, a privately held Pennsylvania corporation
(POECC), and the shareholders of POECC (collectively, the Shareholders). The
following premises are an integral part of this agreement.
1. The Shareholders currently own all of the outstanding proprietary interest of
POECC (POECC Shares).
2. The Shareholders desire to sell, transfer and convey the POECC Shares to CBQI
solely in exchange for 900,000 restricted common shares of CBQI (CBQI Shares).
3. CBQI desires to acquire the POECC Shares solely in exchange for the CBQI
Shares.
4. CBQI, POECC and the Shareholders desire to effect the foregoing conveyances
and transfers of the CBQI and POECC Shares on a tax free basis pursuant to the
provisions of Section 368(b) of the Internal Revenue Code (IRC).
THE PARTIES, THEREFORE, hereby adopt this plan and reorganization agreement
(Agreement) under the IRC and agree as follows:
ARTICLE I
TRANSFER AND CONVEYANCE OF THE CBQI AND POECC SHARES; CONSULTING AGREEMENT
1.1 Transfer and Conveyance of Shares. Subject to all of the terms, conditions,
representations, warranties and covenants set forth herein, the Shareholders
hereby sell, transfer and convey (without reservation and free and clear from
all encumbrances) to CBQI the POECC Shares and CBQI hereby sells, transfers and
conveys (without reservation and free and clear from all encumbrances) to the
Shareholders the CBQI Shares.
1.2 Consulting Agreement of Mr. Lieberman. Mr. Sidney Lieberman has agreed to
serve CBQI as a consultant in exchange for an option to acquire 100,000 shares
of the common stock of CBQI at the market price therefor on the date of this
agreement, the market price being agreed as $3.00 per share. The common shares
which CBQI shall issue to Mr. Lieberman upon exercise of his option, in whole or
in part and from time to time and at any time, shall be forthwith registered by
CBQI under the Securities Act of 1933, as amended, using Form S 8.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. Representations, Warranties and Covenants of CBQI. CBQI represents and
warrants to the Shareholders, jointly and severally, as of the Closing Date as
follows: (a) All necessary action has been taken to make this Agreement a legal,
valid and binding obligation of CBQI enforceable in accordance with its terms
and conditions.
(b) The execution and delivery of this Agreement and the performance by CBQI of
its obligations hereunder will not result in any material breach or violation of
or material default under any material agreement, indenture, lease, license,
mortgage, instrument, or understanding, nor result in any violation of any law,
rule, regulation, statute, order or decree of any kind, to which CBQI or any of
its affiliates is a party or by which they or any of their property is or may be
or become subject, nor in the violation of the articles or bylaws governing the
conduct of CBQI.
(c) CBQI has delivered to POECC and the Shareholders its: (1) annual reports on
Form 10 KSB for the years ended December 31, 1997, and December 31, 1998; (2)
quarterly reports on Form 10 QSB for the fiscal quarters ended March 31, 1998,
June 30, 1998, and September 30, 1998, and (3) periodic report on Form 8 KSB
dated November 19, 1998 (as well as the amendment thereto), all of which were
true and correct as of the date of filing and remain true and correct in all
material respects as of the date hereof. CBQI has made no further filings under
the Securities Exchange Act of 1934, as amended, since its filing on Form 10 KSB
dated December 31, 1998. CBQI has also provided to POECC and the Shareholders
full access to any and all information they desired concerning the business and
operations of CBQI, and CBQI has made available to POECC and the Shareholders
such personnel as have been requested to answer any and all questions which
POECC and the Shareholders may have had concerning their investment in CBQI.
<PAGE>
(d) CBQI shall continue to file for so long as the CBQI Shares are restricted
securities under Rule 144 of the Securities Act such reports as are required
from time to time of CBQI under the Securities Exchange Act of 1934, as amended,
so as to allow for the sale of the CBQI Shares by the Shareholders under said
Rule 144.
(e) The CBQI Shares have each been validly issued and are fully paid for and
nonassessable.
(f) The CBQI Shares are not and shall not be or become subject to any lien,
encumbrance, security interest or financing statement whatsoever. Further, the
CBQI Shares are not the subject of any other agreement in regards thereof.
(g) CBQI has delivered an opinion of its counsel to the effect that the CBQI
Shares have been validly issued and are fully paid for and nonassessable.
(h) CBQI since the date of those reports filed as specified in paragraph 2.1(c)
of this Agreement has not suffered any material and adverse change in its
financial condition, working capital, assets, liabilities, reserves, business,
operations or prospects.
(i) There is no legal, administrative, arbitration or other proceeding, claim or
action of any nature or investigation pending or threatened against or involving
CBQI, or which questions or challenges the validity of this Agreement, or any
action to be taken by CBQI pursuant to this Agreement or in connection with the
transactions contemplated hereby, and CBQI does not know or have any reason to
know of any valid basis for any such legal, administrative, arbitration or other
proceeding, claim or action of any nature or investigation. CBQI is not subject
to any judgment, order or decree entered in any lawsuit or proceeding which has
an adverse effect on its business practices or on its ability to acquire any
property or conduct its business in any area.
(j) No representations or warranties by CBQI in this Agreement and no statement
contained in any document (including, without limitation, those which may be
attached hereto), certificate, or other writing furnished by CBQI to POECC or
the Shareholders pursuant to the provisions hereof or in connection with the
transactions contemplated hereby, contain any untrue statement of material fact
or omit to state any material fact necessary in order to make the statements
herein or therein, in light of the circumstances under which they were made, not
misleading; further, there are no facts known to CBQI which (either individually
or in the aggregate) could or would materially and adversely affect or involve
any substantial possibility of having a material, adverse effect upon the
condition (financial or otherwise), results of operations, assets, liabilities
or businesses of CBQI which have not been disclosed in this Agreement.
(k) CBQI specifically acknowledges and represents that the closing hereunder
was, in effect, simultaneously completed on the effective date hereof.
2.2 Representations, Warranties and Covenants of POECC and the Shareholders.
POECC and the Shareholders each hereby represents and warrants, jointly and
severally, to CBQI as of the Closing Date as follows:
(a) All necessary action has been taken to make this Agreement a legal, valid
and binding obligations of POECC and the Shareholders enforceable in accordance
with its terms and conditions.
(b) The execution and delivery of this Agreement and the performance by POECC
and the Shareholders of their respective obligations hereunder will not result
in any material breach or violation of or material default under any material
agreement, indenture, lease, license, mortgage, instrument, or understanding,
nor result in any violation of any law, rule, regulation, statute, order or
decree of any kind, to which either POECC and/or the Shareholders or any of
their respective affiliates is a party or by which they or any of them or any of
their property is or may be or become subject, nor in the violation of the
articles or bylaws governing the conduct of either POECC or the Shareholders.
<PAGE>
(c) POECC and the Shareholders have delivered to CBQI compiled financial
statements of POECC as of and for the period ended December 31, 1997, a copy of
which is attached to this Agreement. POECC shall subsequently forthwith deliver
compiled financial statements as of and for the period ended December 31, 1998.
The foregoing POECC financial statements shall be prepared, if they have not
already been so, in order to provide, at a minimum, (1) balance sheets dated as
of December 31, 1997, and December 31, 1998; (2) statements of operations for
the one year periods ended December 31, 1996, December 31, 1997, and December
31, 1998; (3) statements of cash flows for the one year periods ended December
31, 1996, December 31, 1997, and December 31, 1998; and (4) a statement of
stockholders' equity from inception through December 31, 1998. The POECC
financial statements attached to this Agreement and which shall be subsequently
delivered (1) are and will be true, accurate and complete; (2) have been and
will be prepared from all relevant books and records pertaining to POECC; (3)
have been or will be prepared in accordance with Generally Accepted Accounting
Principles applied on a consistent basis; and (4) have been or will be prepared
in accordance with Regulation S X under the general rules and regulations
promulgated by the Securities and Exchange Commission pursuant to the authority
granted this governmental agency under the Securities Act of 1933, as amended,
and the Securities Exchange Act of 1934, as amended. The POECC financial
statements undertaken by POECC and the Shareholders to be delivered in
accordance with this Agreement shall be subsequently submitted by the Company to
an audit by the independent auditing firm of the Company. These financial
statements are capable of being audited, no material and adverse changes shall
occur as a result of any adjustments provided by said auditor and the opinion
for these financial statements shall not be qualified in any respect.
The foregoing financial statements will show that POECC has no liabilities of
any kind whatsoever, other than those liabilities which have been satisfied as
of the Closing Date and those obligations to Shareholders, including Mr.
Lieberman and/or his affiliates, which have been satisfied as of the Closing
Date. POECC has acquired, as of the Closing Date and free and clear of all
liens, obligations, rights and other commitments, common shares in CITX, Inc.,
which aggregate 10% of the outstanding common shares of CITX. Further, as of the
Closing Date, POECC has no debt obligation for borrowed money, including
guarantees of or agreements to acquire any such debt obligation of others and
POECC has no outstanding loan to any person.
POECC has not suffered, since December 31, 1997, and to the Closing Date, any
material and adverse change in its financial condition, working capital, assets,
liabilities, reserves, business, operations or prospects.
(d) POECC has no employment agreement with any officer, employee or agent. POECC
is not restricted by agreement from carrying on its business or any part thereof
anywhere in the world or from competing in any line of business with any person.
POECC has no obligation or liability as guarantor, surety, co signor, endorser,
co maker, indemnitor or otherwise in respect of the obligation of any other
person. POECC is not subject to any obligation or requirement to provide funds
to or make any investment (in the form of a loan, capital contribution or
otherwise) in any person. POECC is not a party to any agreement, contract,
commitment or loan to which any of its officers or directors or any affiliate of
POECC or its officers and directors is a party.
(e) POECC has delivered an accurate and complete list of all leases pursuant to
which POECC leases any real or personal property. POECC has also delivered an
accurate and complete list of all licenses pursuant to which POECC licenses or
has acquired the right to use any software or other intangible property. All
such leases and licenses are valid, binding and enforceable in accordance with
their terms, and are in full force and effect. There are no existing defaults by
POECC or any other party under these leases, and no event of default has
occurred which (whether with or without notice, lapse of time or the happening
or occurrence of any other event) would constitute a default thereunder. Any
consents under these leases or licenses have been acquired.
(f) POECC has delivered a list of the customers of POECC showing the approximate
total sales by POECC to each customer during the fiscal year ended December 31,
1988. There has been no adverse change in the business relationship of POECC
with any customer which is material to the consolidated financial condition or
operations of Target.
(g) POECC has duly filed all federal, state and local tax reports and returns
required to be filed by it and has duly paid all taxes and other charges due or
claimed to be due from it by federal, state, local and foreign taxing
authorities. There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any federal, state, local, or
foreign tax return or report for any period.
<PAGE>
(h) All accounts receivable of POECC represent sales actually made in the
ordinary course of business, and are current and collectible.
(i) There is no legal, administrative, arbitration or other proceeding, claim or
action of any nature or investigation pending or threatened against or involving
POECC, or which questions or challenges the validity of this Agreement, or any
action to be taken by POECC pursuant to this Agreement or in connection with the
transactions contemplated hereby, and POECC does not know or have any reason to
know of any valid basis for any such legal, administrative, arbitration or other
proceeding, claim or action of any nature or investigation. POECC is not subject
to any judgment, order or decree entered in any lawsuit or proceeding which has
an adverse effect on its business practices or on its ability to acquire any
property or conduct its business in any area.
(j) The POECC Shares have each been validly issued and are fully paid for and
nonassessable.
(k) The POECC Shares are not and shall not be or become subject to any lien,
encumbrance, security interest or financing statement whatsoever. Further, the
POECC Shares are not the subject of any other agreement in regards thereof.
(l) The POECC Shares represent 100% of the outstanding proprietary interest of
POECC, and there are no outstanding commitments (direct or indirect) which would
cause the issuance or transfer out of treasury of any additional proprietary
interest of POECC, whether common stock, preferred stock or debt.
(m) The Shareholders and POECC have provided to CBQI full access to any and all
information it desired concerning the business and operations of the
Shareholders and/or POECC, and the Shareholders and POECC have made available to
CBQI such personnel as has been requested to answer any and all questions which
CBQI may have had concerning its investment in POECC.
(n) CBQI has delivered an opinion of its counsel to the effect that the CBQI
Shares have been validly issued and are fully paid for and nonassessable.
(o) No representations or warranties by POECC in this Agreement and no statement
contained in any document (including, without limitation, financial statements),
certificate, or other writing furnished by POECC or the Shareholders to CBQI
pursuant to the provisions hereof or in connection with the transactions
contemplated hereby, contain any untrue statement of material fact or omit to
state any material fact necessary in order to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading; further, there are no facts known to POECC which (either
individually or in the aggregate) could or would materially and adversely affect
or involve any substantial possibility of having a material, adverse effect upon
the condition (financial or otherwise), results of operations, assets,
liabilities or businesses of POECC which have not been disclosed in this
Agreement.
(p) POECC and the Shareholders each specifically acknowledge and represent that
the closing hereunder was, in effect, simultaneously completed on the effective
date hereof.
2.3 Understandings of the Shareholders. The Shareholders acknowledge, understand
and agree that:
(a) The certificate representing the CBQI Shares will bear a legend restricting
its transfer under Rule 144 of the Securities Act of 1933, as amended, and will
be issued solely in the name of the Shareholders.
<PAGE>
(b) The CBQI Shares have not been registered under the Securities Act of 1933,
as amended, or any applicable state law (collectively, the Securities Act);
further, the CBQI Shares may not be sold, offered for sale, transferred,
pledged, hypothecated or otherwise disposed of except in compliance with the
Securities Act; further, CBQI has no obligation, and does not intend, to cause
the CBQI Shares to be registered under the Securities Act, or to comply with any
exemption under the Securities Act that would permit a sale or sales of all or
any portion of the CBQI Shares; further, the legal consequences of the foregoing
mean that the Shareholders must bear the economic risk of the investment in the
CBQI Shares for an indefinite period of time; and, further, if the Shareholders
desire to sell or transfer all or any part of the CBQI Shares within the
restricted period, CBQI may require the Shareholders' counsel to provide a legal
opinion that the transfer may be made without registration under the Securities
Act.
(c) No federal or state agency has made any findings or determination as to the
fairness of an investment in CBQI, or any recommendation or endorsement of this
investment.
(d) There is presently only an extremely limited market for the CBQI Shares and
no market may exist in the future for any sale or sales of all or any portion
thereof.
(e) Their commitments to investments that are not readily marketable are not
disproportionate to their net worth, and their investment in the CBQI Shares
will not cause such overall commitment to become excessive.
(f) They have the financial ability to bear the economic risks of this
investment, have adequate means of providing for their current needs, and have
no need for liquidity in this investment.
(g) They have evaluated the high risks of investing in the CBQI Shares and have
such knowledge and experience in financial and business matters in general and
in particular with respect to this type of investment that they are capable of
evaluating the merits and risks of an investment in the CBQI Shares.
(h) They have been given the opportunity to ask questions of and receive answers
from CBQI concerning the terms and conditions of this investment, and to obtain
additional information necessary to verify the accuracy of the information they
desired in order to evaluate their investment, and in evaluating the suitability
of an investment in the CBQI Shares have not relied upon any representations or
other information (whether oral or written) other than that furnished to them by
CBQI or the representatives of CBQI.
(i) They have had the opportunity to discuss with their professional, legal, tax
and financial advisers the suitability of an investment in the CBQI Shares for
its particular tax and financial situation and all information that they have
provided to CBQI concerning themselves and their financial position is correct
and complete as of the date set forth below.
(j) In making the decision to purchase the CBQI Shares they have relied solely
upon independent investigations made by them or on their behalf.
(k) They are acquiring the CBQI Shares solely for their own account, for
investment purposes only, and are not purchasing with a view to, or for, the
resale, distribution, subdivision or fractionalization thereof.
<PAGE>
ARTICLE III
MISCELLANEOUS
3.1. Entire Agreement; Modification. This Agreement sets forth and constitutes
the entire agreement between the parties hereto with respect to the subject
matter hereof, and supersedes any and all prior agreements, understandings,
promises, warranties, covenants and representations made by any party to the
other concerning the subject matter hereof and the terms applicable hereto. This
Agreement may not be released, discharged, amended or modified in any manner
except by an instrument in writing signed by duly authorized representations of
the parties hereto.
3.2. Severability. The invalidity or unenforceabilty of one or more provisions
of this Agreement shall not affect the validity or enforceability of any of the
other provisions hereof, and this Agreement shall be construed in all respects
as if such invalid or unenforceable provisions are omitted.
3.3. Governing Law. This Agreement shall be deemed to have been entered into and
shall be construed and enforced in accordance with the laws of the State of
Texas.
3.4. Waivers. The failure of any party hereto to insist, in any one or more
instances, upon the performance of any of the terms, covenants or conditions of
this Agreement or to otherwise exercise any right hereunder, shall not be
construed as a waiver or relinquishment of the future performance of any such
term, covenant or condition or the future exercise of such right, but the
obligations of the party with respect to such future performance shall continue
in full force and effect.
3.5. Headings. The headings in the articles, section and paragraphs used in this
Agreement are included for convenience only and are not to be used in construing
or interpreting this Agreement.
3.6. Notice. All notices, demands, or requests hereunder shall be in writing and
served either personally, by certified mail, return receipt requested, by
Federal Express or other reputable overnight courier, or by facsimile, as
follows:
If to CBQI:
CBQ, Inc.
4851 Keller Springs Rd., Ste. 213
Dallas TX 75248
(972) 732 1169: FAX
If to POECC or the Shareholders:
Priority One Electronic Commerce Corporation
c/o Mr. Sidney Lieberman
8699 Egret Isle Terrace
Lake Worth FL 33467
(561) 964 1233: FAX
3.7. Successor and Assigns. This Agreement, and each and every provision
thereof, shall be binding upon and shall inure to the benefit of the parties,
their respective successors, successors-in-title, heirs and assigns, and each
and every successor-in-interest to any party, whether such successor acquires
such interest by way of gift, purchase, foreclosure, or by any other legal
method, who shall hold such interest subject to all the terms and conditions of
this Agreement.
<PAGE>
3.8. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but such counterparts shall together
constitute one and the same instrument.
3.9. Attorneys' Fees. In the event of any dispute with respect to this
Agreement, the prevailing party shall be entitled to its reasonable attorneys'
fees and other costs and expenses incurred in resolving such dispute.
3.10. Expenses. Each party shall pay the expenses incurred by them under or in
connection with this Agreement, including counsel fees and expenses of their
respective representatives.
3.11. Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants of CBQI, PEOC and the Shareholders
contained in this Agreement shall survive the execution hereof, and shall be
unaffected by any investigation made by any party at any time.
3.12. Further Assurances. At any time and from time to time after the date of
this Agreement, each party shall execute such additional instruments and take
such other and further action as may be reasonably requested by any other party
or otherwise to carry out the intent and purpose of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered the date first above written.
CBQ, INC., a Colorado corporation
By: /s/ Michael Sheriff
Michael Sheriff, CEO
PRIORITY ONE ELECTRONIC COMMERCE CORPORATION, a Pennsylvania corporation
By: /s/ Sidney Lieberman
Sidney Lieberman, President
SHAREHOLDERS:
Sidney Lieberman Revocable Trust Lenora J. Spera Trust
By: /s/ Sidney Lieberman By: /s/ Sidney Lieberman
Trustee Trustee
Howard Frank, Individually Bernie Roemmele, Individually
/s/ Howard Frank /s/ Bernie Roemmele
Howard Frank Bernie Roemmele
Randall King, Individually Timothy Classen, Individually
/s/ Randall King /s/ Timothy Classen
Randall King Timothy Classen
Richard Bergey, Individually Barbara Riehl, Individually
/s/ Richard Bergey /s/ Barbara Riehl
Richard Bergey Barbara Riehl
<PAGE>
Exhibit 10.3
(Global Logistics Partners Acquisition Contract)
AGREEMENT OF PURCHASE
This plan and agreement of purchase (Plan) has been entered into in Dallas,
Texas, this 11th day of May, 1999, between CBQ, Inc., a Colorado corporation
referred to in this Agreement as either the Purchaser or CBQ, and Global
Logistics Partners, L.L.C., a Texas corporation sometimes referred to in this
agreement as Global or Seller.
CBQ will acquire (at the Closing) from Global 19% of the issued and outstanding
capital stock of Global Logistics Partners, L.L.C. in exchange for shares of
voting stock of CBQ.
ARTICLE I
EXCHANGE OF VOTING CAPITAL STOCK
1.01. Transfer and Delivery of Global Logistics Partners, L.L.C. Shares. At the
closing Global will Issue and deliver to CBQ certificates evidencing 19% of the
issued and outstanding Capital stock of Global Logistics Partners, L.L.C., in
the name of CBQ, Inc.
1.02. Issuance and Delivery of CBQ Shares. In exchange for the transfer by
Global to CBQ of 19% of the issued and outstanding Global Logistics Partners,
L.L.C. capital shares hereunder, CBQ will forthwith cause to be issued and
delivered to the Global 4,233,200 restricted common shares of CBQ (Collectively,
the CBQ Shares).
1.03. Additional Consideration for Issuance of CBQ Shares. As additional
consideration for CBQ entering into this agreement Rick Williamson (the
President and Major Shareholder of Global Logistics Partners, L.L.C.) agrees to
sit on the Board of Directors of CBQ, Inc., and to be appointed as President/CEO
of CBQ and its Subsidiary Cyberquest, Inc., (a Colorado Corporation.). In
addition he will form a management team which will include a CFO, Sales Manager,
and additional management personnel to cover all aspects of building CBQ and
BID4IT into a world class Internet auction site for Business to Business
transactions. CBQ shall make additional seats available on its Board of
Directors for nominees selected by Mr. Williamson. Mr. Williamson shall fund
(through loans or equity investments) the on going operations of CBQ.
1.04. Closing Date. The Closing Date will be May 10, 1999 at 4:00 PM at the
offices of CBQ in Dallas, Texas unless otherwise determined by Mutual agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS AND ACQUIRED CORPORATION
2.01. Organization and Standing. Global Logistics Partners, L.L.C. is a
corporation duly organized, validly existing and in good standing under the laws
of Texas, with all Corporate powers necessary to own property and carry on its
business as it is now being conducted. Copies of the articles of incorporation
and bylaws of Global Logistics Partners, L.L.C. delivered to Purchaser herewith
are complete and accurate as of the Closing Date.
2.02. Capitalization. Global Logistics Partners, L.L.C. has an outstanding
capitalization, which is all in the hands of the Shareholders, all of which has
been fully paid for and is non assessable. There are no outstanding
subscriptions, options, contracts, commitments or demands relating to the
capital stock of Global Logistics Partners, L.L.C. or any other agreements of
any character under which Global Logistics Partners, L.L.C. or the Shareholders
would be obligated to issue or purchase shares of Global Logistics Partners,
L.L.C. capital stock, except as described and disclosed on Exhibit 1 to this
Agreement.
<PAGE>
2.03. Litigation. Global Logistics Partners, L.L.C. is not a party to, nor has
it been threatened with, any litigation or governmental proceeding that, if
decided adversely to it, would have a material and adverse effect on its
operations or business, or on the financial condition, net worth, prospects or
business of Global Logistics Partners, L.L.C. To the best of the Global
Logistics Partners, L.L.C.'s knowledge, it is not aware of any facts that might
result in any action, suit or other proceeding that would result in any material
and adverse change in the business or financial condition of Global Logistics
Partners, L.L.C.
2.04. Compliance with Law and Instruments. The business and operations of Global
Logistics Partners, L.L.C. are not infringing on or otherwise acting adversely
to any copyrights, trademark rights, patent rights or licenses owned by any
other person, and there is not any pending claim or threatened action with
respect to such rights. Global Logistics Partners, L.L.C. is not obligated to
make any payments in the form of royalties, fees or otherwise to any owner of
any patent, trademark, trade name or copyright, except as set forth on Exhibit
2.
2.05. Authority. The execution and performance of this Agreement have been duly
authorized by all requisite corporate action. This Agreement constitutes a valid
and binding obligation of Global Logistics Partners, L.L.C. and the Shareholders
in accordance with its terms. No provision of the articles of incorporation,
bylaws, minutes, share certificates or contracts prevents Global Logistics
Partners, L.L.C. and/or the Shareholders from delivering the Global Logistics
Partners, L.L.C. shares to CBQ in the manner contemplated under the Plan.
2.06. Taxes. Global Logistics Partners, L.L.C. has filed all income tax returns
and, in each jurisdiction where qualified or incorporated, all income tax and
franchise tax returns that are required to be filed. Global Logistics Partners,
L.L.C. has paid all taxes as shown on the returns as have become due, and has
paid all assessments received that have become due.
2.07. Brokers. All negotiations on the part of Global Logistics Partners, L.L.C.
and the Shareholders related to the Plan have been accomplished solely by Global
Logistics Partners, L.L.C. and the Shareholders without the assistance of any
person employed as a broker or finder. Global Logistics Partners, L.L.C. and the
Shareholders have done nothing to give rise to any valid claims for a broker's
commission, finder's fee or any similar charge.
2.08. Full Disclosure. As of the Closing Date, Global Logistics Partners, L.L.C.
and the Shareholders have disclosed all events, conditions and facts materially
affecting the business and prospects of Global Logistics Partners, L.L.C. The
Shareholders and Global Logistics Partners, L.L.C. have not withheld knowledge
of any event, condition or fact that they have reasonable grounds to know may
materially affect the business and prospects of Global Logistics Partners,
L.L.C. None of the representations and warranties made by the Shareholders or
Global Logistics Partners, L.L.C. in this Agreement or in any instrument,
writing or other document furnished to CBQ contains any untrue statement of a
material fact, or fails to state a material fact.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.01. Organization and Standing. CBQ is a corporation duly organized, validly
existing and in good standing under the laws of Colorado, with all corporate
powers necessary to own property and carry on its business as it is now being
conducted. Copies of the articles of incorporation and bylaws of CBQ delivered
to Global Logistics Partners, L.L.C. herewith are complete and accurate as of
the Closing Date. Global Logistics Partners has reviewed the latest 10KSB as
filed by CBQ for the period ended 12/31/98.
3.02. Subsidiaries. CBQ has subsidiaries.
3.03. Capitalization. The Capital structure of CBQ, Inc., is as set out in the
10KSB as filed for the period ending 12/31/98.
3.04. Due Delivery. The CBQ Shares issued to Global Logistics Partners LLC have
been validly authorized and issued and are fully paid for and non assessable. No
CBQ shareholder has any preemptive right of subscription or purchase with
respect to these shares.
<PAGE>
3.05. Authority. The execution and performance of this Agreement have been duly
authorized by all requisite corporate action. This Agreement constitutes a valid
and binding obligation of CBQ in accordance with its terms. No provision of the
articles of incorporation, bylaws, minutes, share certificates or contracts
prevents CBQ from delivering the CBQ shares in the manner contemplated under the
Plan.
3.06. Brokers. All negotiations on the part of CBQ related to the Plan have been
accomplished solely by CBQ without the assistance of any person employed as a
broker or finder. CBQ has done nothing to give rise to any valid claims for a
broker's commission, finder's fee or any similar charge.
3.07. Full Disclosure. As of the Closing Date, CBQ has disclosed all events,
conditions and facts materially affecting the business and prospects of CBQ, and
CBQ has not withheld knowledge of any event condition or fact that it has
reasonable grounds to know may materially affect the business and prospects of
CBQ. None of the representations and warranties made by CBQ in this Agreement or
in any instrument, writing or other document furnished to Global Logistics
Partners, L.L.C. contains any untrue statement of a material fact, or fails to
state a material fact.
ARTICLE IV
SURVIVAL OF WARRANTIES AND WARRANTIES
4.01. Nature and Survival of Representations and Warranties. All statements of
fact contained in this Agreement or in any memorandum, certificate, letter,
document or other instrument delivered by or on behalf of any of the parties
hereto to any other party pursuant to this Agreement shall be deemed
representations and warranties made by the delivering party to the other parties
under this Agreement. The covenants, representations and warranties of the
parties shall survive the Closing Date for a period of one year, and then they
shall lapse and be of no further effect.
4.02. Expenses. The parties to this Agreement shall pay their own expenses
incurred hereunder and in regards of the transactions contemplated hereby,
including, but not limited to, all fees and expenses of their respective counsel
and accountants.
ARTICLE V
COMPLIANCE WITH SECURITIES LAWS
5.01. Acknowledgments of the Shareholders. Global Logistics Partners LLC
acknowledges, understands and agrees that: (a) The certificates representing the
CBQ Shares will each bear a legend restricting transfer in accordance with the
exemptions from registration under the Securities Act of 1933, as amended, which
CBQ has relied upon in the issuance of the CBQ Shares. (b) The CBQ Shares have
not been registered under the Securities Act of 1933, as amended, or any
applicable state law (collectively, the Securities Act). (c) The CBQ Shares may
not be sold, offered for sale, transferred, pledged, hypothecated or otherwise
disposed of except in compliance with the Securities Act of 1933 or 1934. (d)
The legal consequences of the foregoing mean that Global must bear the economic
risk of the investment in the CBQ Shares for the requisite period of time. (e)
No federal or state agency has made any finding or determination as to the
fairness of an investment in CBQ, or any recommendation or endorsement of this
investment.
<PAGE>
ARTICLE VI
MISCELLANEOUS
6.01. Amendments. This Agreement may be amended or modified at any time, but
only by an instrument in writing executed by Global Logistics Partners, L.L.C.,
and CBQ.
6.02. Waiver. Global Logistics Partners, L.L.C. and/or CBQ may, in writing, (a)
extend the time for performance of any of the obligations of any other party to
this Agreement, (b) waive any inaccuracies or misrepresentations contained in
this Agreement or in any document delivered pursuant to this Agreement by any
other party and/or (c) waive compliance with any of the covenants, or
performance of any obligations, contained in this Agreement by any other party.
6.03. Assignment. (a) Neither this Agreement nor any right created hereby shall
be assignable by any party without the prior written consent of the other
parties, except by the laws of succession. (b) This Agreement shall be binding
on and inure to the benefit of the respective successors and assigns of the
parties. Nothing in this Agreement, expressed or implied, is intended to confer
upon any person, other than the parties and their permitted successors and
assigns, any rights or remedies under this Agreement.
6.04. Notices. Any notice or other communication required or permitted by this
Agreement must be in writing and shall be deemed to be properly given when
delivered in person to an officer of the other party, or to the party
individually when deposited in the U.S. Mails for transmittal by certified or
registered mail, postage prepaid, or when deposited with a public telegraph
company for transmittal, charges prepaid, or when delivered via facsimile;
provided, however, that the communication is addressed as follows:
in case of Global Logistics Partners, L.L.C. and the Shareholders:
6300 Ridglea Place
Suite 600
Fort Worth, TX 76116; (817) 737-6100; and
in case of CBQ:
4851 Keller Springs Rd.
Suite. 213
Addison, Texas 75001; (972) 732-1100
6.05. Headings. Paragraph and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
6.06. Entire Agreement. This Agreement contains the entire agreement between the
parties relating to the subject matter hereof. It may be executed in any number
of counterparts, but the aggregates of such counterparts constitute only one and
the same instrument.
<PAGE>
6.07. Partial Invalidity. In the event that any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if it never contained any such invalid, illegal or unenforceable
provisions.
6.08. Controlling Law. The validity, interpretation and performance of this
Agreement shall be controlled by and construed under the laws of the State of
Texas, and venue for any lawsuit shall be in Dallas County, Texas.
6.09. Attorney's Fees. If any action at law or in equity, including any action
for declaratory relief, is brought to enforce or interpret the provisions of
this Agreement, the prevailing party shall be entitled to recover reasonable
attorney's fees from the other party. The attorney's fees may be ordered by the
court in the trial of any action described in this paragraph or may be enforced
in a separate action brought for determining attorney's fees.
6.10. Specific Performance. The parties declare that it is impossible to measure
in money the damages that will accrue to a party or its successors as a result
of any other parties' failure to perform any of the obligations under this
Agreement; therefore, if a party or its successor institutes any action or
proceeding to enforce the provisions of this Agreement, any party opposing such
action or proceeding agrees that specific performance may be sought and obtained
for any breach of this Agreement.
6.11. Arbitration. Any dispute relating to the interpretation or performance of
this Agreement shall be resolved at the request of either party through binding
arbitration. Arbitration shall be conducted in Dallas, Texas in accordance with
the then-existing rules of the American Arbitration Association. Judgment upon
any award by the arbitrators may be entered by any state or federal court having
jurisdiction. It is the intent of the parties to this Agreement that to
arbitrate be irrevocable.
Purchaser: CBQ, Inc.:
By: /s/ Michael L. Sheriff
Michael L. Sheriff, CEO
Seller: Global Logistics Partners, L.L.C.
By: /s/ Rick Williamson
Name: Rick Williamson
Title: President
<PAGE>
<TABLE>
<S> <C>
PERIOD-TYPE 3-MOS
FISCAL-YEAR-END DEC-31-1999
PERIOD-START JAN-01-1999
PERIOD-END MAR-31-1999
CASH 22,418
SECURITIES 0
RECEIVABLES 9,898
ALLOWANCES 0
INVENTORY 0
CURRENT-ASSETS 39,574
PP&E 225,709
DEPRECIATION 65,960
TOTAL-ASSETS 528,466
CURRENT-LIABILITIES 225,345
BONDS 0
PREFERRED-MANDATORY 0
PREFERRED 70
COMMON 3,640
OTHER-SE 132,116
TOTAL-LIABILITY-AND-EQUITY 528,466
SALES 18,852
TOTAL-REVENUES 18,852
CGS 0
TOTAL-COSTS 155,421
OTHER-EXPENSES 0
LOSS-PROVISION 0
INTEREST-EXPENSE 1,847
INCOME-PRETAX (136,569)
INCOME-TAX 0
INCOME-CONTINUING (136,569)
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME (136,569)
EPS-PRIMARY (.001)
EPS-DILUTED (.001)
</TABLE>
Exhibit 2.d Amendment to quarterly report on Form 10QSB for three month period
ended March 31, 1999.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT #1 TO
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________________ to __________________
Commission file number: 33-14707-NY
CBQ, INC.
---------
(Exact name of small business issuer as specified in its charter)
Colorado 84-1047159
- -------------------------------- ---------------------
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
6300 Ridgelea Place, Ste. 600 76116
- --------------------------------------- ------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (817) 737-6100
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of May 24, 1999, there were
approximately 26,406,532 shares outstanding.
<PAGE>
I. PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CBQ, Inc. and Subsidiary
(formerly FREEDOM FUNDING, INC.)
(a development stage company)
BALANCE SHEETS
March 31, December 31,
1999 1998
---- ----
(Unaudited)
Assets:
Current Assets:
Cash $ 22,418 $ 97,907
Accounts Receivable 9,898 --
Other Current Assets 7,258 4,998
--------- ---------
Total Current Assets $ 39,574 $ 102,905
Equipment, at cost (net at March 31)
Computers and related equipment 212,206 68,905
Furniture and fixtures 8,214 5,954
Software 5,289 --
--------- ---------
225,709 74,859
Less accumulated depreciation 65,960 38,960
--------- ---------
159,749 35,899
Other assets (net):
bid4it technology, 28,125 37,500
Organization costs 3,965 667
Goodwill 297,053 48,000
Deposits -- 7,259
--------- ---------
Total Assets $ 528,466 $ 232,230
========= =========
Liabilities and Stockholders' Equity :
Current Liabilities:
Accounts payable 104,273 $ 105,918
Accrued royalties 50,000 79,382
Accrued expenses, other 13,870 31,203
Deferred revenues 52,121 --
Deposit 2,500 2,500
Officer Advances -- 2,575
Sales Tax Payable 2,581 --
--------- ---------
Total Current Liabilities $ 225,345 $ 221,578
========= =========
Long-term liabilities:
Notes Payable to Bank 14,026 --
Royalties 79,382 --
Notes to shareholders 73,887 --
--------- ---------
Total Long-term liabilities 167,295 --
========= =========
Stockholders' Equity:
Preferred stock, 70,000 shares issued 70 70
Common stock, issued 20,275,332 3,640 2,640
issud at December 31, 21,275,332
issued at March 31
Additional paid-in capital 470,425 209,682
Accumulated deficit (338,309) (201,740)
--------- ---------
Total stockholders' equity (deficit) (135,826) 10,652
--------- ---------
Total liabilities and stockholders'
equity (deficit) $ 528,466 $ 232,230
========= =========
See accompanying Notes to Financial Statements
<PAGE>
CBQ, Inc. and Subsidiary
(formerly FREEDOM FUNDING, INC.)
(a development stage company)
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
-------------------------------
1999 1998
---- ----
Revenues $ 18,852 $ --
Costs and expenses
Costs of revenues 7,232 --
Sales and marketing 19,070 --
General and administrative 106,063 --
Depreciation and amortization 21,209 --
Interest expense 1,847 --
------------ ------------
155,421 --
Net income (loss) (136,569) --
Net income (loss) per common share * *
Weighted average number of
common shares outstanding 20,278,432 2,075,325
* Less than $.01 per share
See accompanying Notes to Financial Statements
<PAGE>
CBQ, Inc. and Subsidiary
(formerly FREEDOM FUNDING, INC.)
(a development stage company)
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
----------------------------
1999 1998
---- ----
OPERATING ACTIVITIES:
Net (loss) (136,569) --
Adjustments necessary to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 21,209 --
Increase in accounts receivable (2,075) --
Increase in other current assets (2,260) --
Decrease in deposits receivable 7,259 --
Decrease in accounts payable (23,043) --
Increase in royalties payable 50,000 --
Decrease in other accrued expenses (24,322) --
Increase in deferred revenues 7,434 --
Decrease in officer advances (2,575) --
Decrease in sales tax payable (941) --
--------- --
Net cash used in operating activities (105,883) --
INVESTING ACTIVITIES:
Net assets acquired in acquisition of
Reliance Technologies, Inc. (261,178) --
--------- --
Net cash used in operating activities (261,178)
FINANCING ACTIVITIES:
Restricted common stock issued in
acquisition of Reliance Technologies 261,743 --
Loans from shareholders 30,355 --
Repayment of notes payable (526) --
--------- --
Net cash used in operating activities 291,572 --
--------- --
NET INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS (75,489) --
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 97,907 --
--------- --
END OF PERIOD $ 22,418 --
========= ==
See accompanying Notes to Financial Statements
<PAGE>
CBQ, Inc. and Subsidiary
(formerly FREEDOM FUNDING, INC.)
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
Basis of Presentation: In the opinion of management of CBQ, Inc. (CBQI or the
Company), the accompanying consolidated financial statements, which have not
been audited by independent certified public accounts, contain all adjustments
necessary to present fairly the Company's consolidated financial position,
results of its operations, and its cash flows for the periods reported. The
consolidated finanial statements contain the accounts of the Company and its
subsidiaries. The statement of operations reflects the results of Reliance
Technologies, Inc., and its subsidiaries for the period from March 15, 1999
(date of acquisition) to March 31, 1999. All significant intercompany balances
and transactions have been eliminated. The results of operations for the three
months ended March 31, 1999 and 1998 are not necessarily indicative of the
results to be expected for a full year.
Note 1. Organization and Nature of Business: CBQ, Inc., (formerly Freedom
Funding, Inc.) a Colorado corporation, was incorporated September 18, 1986,
under the laws of the State of Delaware, and changed its situs to Colorado in
1989. Since inception, the Company has been in the development stage. The
Company's primary intended activity is to engage in all aspects of review and
evaluation of private companies, partnerships or sole proprietorships for the
purpose of completing mergers or acquisitions with the Company, and to engage in
mergers and acquisitions with any or all varieties of private entities. On
November 18, 1999, the Company acquired a wholly-owned subsidiary, CyberQuest,
Inc., which had recently purchased the assets and business of CyberQuest, Ltd.
The Company on March 15, 1999, acquired all of the outstanding shares of
Reliance Technologies, Inc., a privately-held Texas corporation (Reliance), in a
tax free exchange. Reliance was acquired solely for the issuance of 1,000,000
restricted common shares of the Company. A a result of these acquisitions, the
Company is now a full service internet development company, specializing in
developing, implementing and maintaining creative business WebSites, Commercial
Sites and Database Development.
CyberQuest has also developed a straight forward method that frees small
business from having to integrate and develop significant amounts of software
and manage the internet site. The Company's internet sites, goodstuffcheap,
bid4it and shop4it.com allow clients to place their products and services on the
Internet quickly and inexpensively and to begin transacting commerce over the
Net.
Note 2. A summary of significant accounting policies is currently on file with
the U.S. Securities and Exchange Commission in registrant's previous filings
under the Exchange Act.
Note 3. The loss per share was computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the period.
Note 4. Registrant has not declared or paid dividends on its common shares since
inception.
Note 5. The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not include all
information and footnotes required by generally accepted accounting principles
for complete financial statements.
Note 6. Income taxes have not been provided for in that registrant has not had a
tax liability from inception through the date of this filing, due to operating
losses.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This report contains certain forward-looking statements with respect to the
Company's operations, financial condition and liquidity. These statements
reflect management's best assessment of a number of risks and uncertainties. The
Company's results could differ materially from the results anticipated in these
forward looking statements as a result of a number of factors described in this
report and other risks described in the Company's other filings with the
Securities and Exchange Commission.
Results of Operations: The Company had no operations until the fourth quarter of
1998, when it acquired CyberQuest, as previously reported. Accordingly, there
were no operations in the first quarter of 1998 to compare with the operations
of the corresponding quarter of the current year. On March 15, 1999, the Company
acquired all of the outstanding shares of Reliance Technologies, Inc., a
privately-held Texas corporation ("Reliance"), in a tax free exchange. Reliance
was acquired solely for the issuance of 1,000,000 "restricted" common shares of
the Company. Revenues for the first three months of 1999 amounted to $18,852,
which was entirely attributed to the operations of Reliance from March 15, 1999,
through March 31, 1999. This income was realized from consulting fees and
charges for providing internet services. Costs of revenues of $7,232 were
primarily incurred by Reliance and its subsidiary in connection with its
operations as an internet service provider. Sales and marketing expenses of
$19,070 were incurred by the Company and its subsidiaries in promoting their
various activities in the area of internet auctions and internet services.
General and administrative expenses amounted to $106,063, which included salary
expenses, the expenses of running the Company's office in Dallas, and legal and
professional fees.
On 14, 1999, the Company acquired all of the outstanding shares of Priority One
Electronic Commerce Corporation, a privately-held Pennsylvanian corporation
("POECC"), in a tax free exchange. POECC was acquired solely for the issuance of
900,000 "restricted" common shares of the Company. Concurrently with the
closing, the Company engaged the president of POECC, Mr. Sidney Lieberman, as a
consultant. Mr. Lieberman, in accordance with the terms of his consulting
agreement was granted an option to acquire 100,000 common shares of the Company
at the market price therefor on the date of closing, which was then$3.00 per
share. The common shares which the Company optioned to Mr. Lieberman upon
exercise of his option will be registered under the Securities Act of 1933. Mr.
Lieberman also serves on the board of directors for the Company.
On May 11, 1999, the Company acquired 19% of the outstanding interest of Global
Logistics Partners, LLC, a privately-held Texas limited liability company
("GLP"), in a tax free exchange. This interest was acquired solely for the
issuance of 4,233,200 "restricted" common shares of the Company. Concurrenty
with the closing, Mr. Richard Williamson assumed the positions of Chairman of
the Board of Directors, CEO and President of the Company, and GLP assumed
operational control of the Company.
Liquidity: The Company has not generated material cash flows from operating or
investing activities since inception. Operating capital was primarily provided
from inception through 1987 from the proceeds of an initial funding prior to a
public offering and then from the public offering itself. The Company then was
extended credit through a former officer and director, all of which was
subsequently converted to common stock. The Company, during the period at issue,
received proceeds from loans from certain shareholders. After the period covered
by this report, the Company acquired its interest in GLP and GLP agreed to
provide managerial support to the Company and to use its best efforts to
perpetuate the business of the Company.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Litigation: No material legal proceedings to which the Company (or any
officer or director of the Company, or any affiliate or owner of record or
beneficially of more than five percent of the Common Stock, to management's
knowledge) is a party or to which the property of the Company is subject is
pending and no such material proceeding is known by management of the Company to
be contemplated.
Item 2. Change in Securities: This item is not applicable to the Company for the
period covered by this report.
Item 3. Defaults Upon Senior Securities: This item is not applicable to the
Company for the period covered by this report.
Item 4. Submission of Matters to a Vote of Security Holders: There were no
meetings of security holders during the period covered by this report; thus,
this item is not applicable.
Item 5. Other Information: There is no additional information which the Company
is electing to report under this item at this time.
Item 6. Exhibits and Reports on Form S-K: No reports on Form 8-K were filed by
the Company during the period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized this 24th day of May, 1999.
CBQ, INC.
(Registrant)
By: /s/ Richard Williamson
- --------------------------
Richard Williamson, President and
Chief Executive Officer
By: /s/ Robert W. Hampton
- --------------------------
Robert W. Hampton,Chief Financial
and Accounting Officer and Treasurer
<PAGE>
Exhibits:
- ---------
10.1 Reliance Acquisition Contract
10.2 Priority One Acquisition Contract
10.3 Global Logistics Partners Acquisition Contract
<PAGE>
Exhibit 10.1
PLAN AND AGREEMENT OF PURCHASE
This plan and agreement of purchase (Plan) has been adopted as a reorganization
under Section 368(b) of the Internal Revenue Code and entered into in Dallas,
Texas, this fifth day of March, 1999, between CBQ, Inc., a Colorado corporation
referred to in this Agreement as either the Purchaser or "CBQ", and Reliance
Technologies, Inc., a Texas corporation, and the shareholders of Reliance
Technologies, Inc., all of whom are sometimes collectively referred to in this
Agreement as the "Shareholders".
CBQ will acquire (at the Closing) from the Shareholders 100% of the issued and
outstanding capital stock of Reliance Technologies, Inc. in exchange for shares
of voting stock of CBQ. Under this Plan, Reliance Technologies, Inc. will become
a subsidiary of CBQ.
ARTICLE I
EXCHANGE OF VOTING CAPITAL STOCK
1.01. Transfer and Delivery of Reliance Technologies, Inc. Shares. At the
closing Shareholders will transfer and deliver to CBQ certificates evidencing
100% of the issued and outstanding Capital stock of Reliance Technologies, Inc.
duly endorsed in blank so as to effect transfer by delivery.
1.02. Issuance and Delivery of CBQ Shares. In exchange for the transfer by
Shareholders to CBQ of 100% of the issued and outstanding Reliance Technologies,
Inc. capital shares hereunder, CBQ will forthwith cause to be issued and
delivered to the Shareholders 1,000,000 restricted common shares of CBQ
(Collectively, the CBQ Shares).
1.03. CBQ will establish at closing "The Reliance Technology Stock Option Plan",
Exhibit 4 to this Agreement, and will contribute 100,000 shares to this
Incentive Stock Option Plan for key employees of Reliance Technologies, Inc.
1.04. CBQ will fund or will have funded the Business Plan of Reliance
Technology, Inc., in the cumulative amount of $250,000, within twelve (12)
months of the Closing Date. Funded will mean that CBQ has arranged equity
financing from any source. It may involve equipment or services provided by
outside suppliers.
1.05. Right of Recission. Should CBQ not fund or arrange funding as described in
1.04 above, then Reliance Technologies, Inc. reserves the right to rescind this
Agreement in its entirety. If rescinded, all CBQ Shares issued in 1.02 above
shall be transferred and delivered to CBQ; the certificates duly endorsed in
blank so as to effect transfer by delivery. Any rights, including shares issued
from those rights, granted under the Reliance Technology Stock Option Plan in
1.03 above shall be immediately void and of no effect. In addition, all monies
funded under 1.04 above are due and payable to CBQ. This Right of Recission will
expire Midnight twelve (12) months from the Date of Closing.
1.04.Closing Date. The Closing Date will be March 15, 1999 at 10:00 AM at the
offices of CBQ in Dallas, Texas unless otherwise determined by Mutual
agreement.
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS AND ACQUIRED CORPORATION
2.01. Organization and Standing. Reliance Technologies, Inc. is a corporation
duly organized, validly existing and in good standing under the laws of Texas,
with all Corporate powers necessary to own property and carry on its business as
it is now being conducted. Copies of the articles of incorporation and bylaws of
Reliance Technologies, Inc. delivered to Purchaser herewith are complete and
accurate as of the Closing Date.
2.02. Balance Sheet. A balance sheet and related statements of operations, cash
flows and equity of Reliance Technologies, Inc. dated as of and for the three
year or lesser period, if inception occurred within three years, ended December
31, 1998, shall forthwith be delivered to CBQ. Reliance Technologies, Inc. shall
cause these financial statements to be (a) audited in accordance with Generally
Accepted Auditing Standards, (b) prepared in accordance with Generally Accepted
Accounting Principles applied on a consistent basis fairly presenting the
financial position of Reliance Technologies, Inc. and (c) prepared to as to
comply with Regulation S X and the time periods set forth in Form 8-KSB, that
being within 75 days after the Closing Date. Reliance Technologies, Inc. shall
also deliver to CBQ within the aforesaid 75 day period any other audited and/or
unaudited financial statements required under Regulation S-X, Form 8-KSB or
otherwise by applicable securities laws. (The foregoing audited and unaudited
financial statements are collectively referred to herein as the "Balance
Sheet".)
2.03. Capitalization. Reliance Technologies, Inc. has an outstanding
capitalization, which is all in the hands of the Shareholders, all of which has
been fully paid for and is non assessable. There are no outstanding
subscriptions, options, contracts, commitments or demands relating to the
capital stock of Reliance Technologies, Inc. or any other agreements of any
character under which Reliance Technologies, Inc. or the Shareholders would be
obligated to issue or purchase shares of Reliance Technologies, Inc. capital
stock, except as described and disclosed on Exhibit 1 to this Agreement.
2.04. Title to Assets. Reliance Technologies, Inc. has good and marketable title
to all of its assets, all as set forth in the Balance Sheet, none of which are
subject to any mortgage, pledge, lien, charge, security interest, encumbrance or
restriction whatsoever except those that: (a) are disclosed on the Balance Sheet
and/or the footnotes thereto or (b) do not materially and adversely affect the
value of the asset. Further, the assets of Reliance Technologies, Inc. are in
good condition and repair.
2.05. Schedule of Assets. Reliance Technologies, Inc. shall forthwith deliver to
Purchaser a schedule of assets containing, as of the Closing Date, a true and
complete: (a) description of all software licensing and sublicensing agreements
in favor of or made by Reliance Technologies, Inc.; (b) description of any real
property in which Reliance Technologies, Inc. has a leasehold interest; (c) list
of all capitalized equipment of Reliance Technologies, Inc. that sets forth any
liens, claims, encumbrances, charges, restrictions, covenants and conditions
concerning the listed items; (d) list of all machinery, tools, and equipment in
which Reliance Technologies, Inc. has a leasehold interest, with a description
of each interest; (e) list of all patents, patent licenses, trademarks,
trademark registrations, trade names, copyrights and copyright registrations
owned by Reliance Technologies, Inc.; and (f) list of all interests in
subsidiaries and/or joint ventures.
2
<PAGE>
2.06. Liabilities. Except as set forth in the Balance Sheet, Reliance
Technologies, Inc. presently has no outstanding indebtedness other than
liabilities incurred in the ordinary course of business. Reliance Technologies,
Inc. is not in default with respect to any terms or conditions of any
indebtedness. Further, Reliance Technologies, Inc. has not made any assignment
for the benefit of creditors, nor has any involuntary or voluntary petition in
bankruptcy been filed by or against Reliance Technologies, Inc..
2.07. Litigation. Reliance Technologies, Inc. is not a party to, nor has it been
threatened with, any litigation or governmental proceeding that, if decided
adversely to it, would have a material and adverse effect on its operations or
business, or on the financial condition, net worth, prospects or business of
Reliance Technologies, Inc. To the best of the Reliance Technologies, Inc.'s
knowledge, it is not aware of any facts that might result in any action, suit or
other proceeding that would result in any material and adverse change in the
business or financial condition of Reliance Technologies, Inc.
2.08. Compliance with Law and Instruments. The business and operations of
Reliance Technologies, Inc. are not infringing on or otherwise acting adversely
to any copyrights, trademark rights, patent rights or licenses owned by any
other person, and there is not any pending claim or threatened action with
respect to such rights. Reliance Technologies, Inc. is not obligated to make any
payments in the form of royalties, fees or otherwise to any owner of any patent,
trademark, trade name or copyright, except as set forth on Exhibit 2.
2.09. Contractual Obligations. Reliance Technologies, Inc. is not a party to or
bound by any written or oral: (a) contract not made in the ordinary course of
business, (b) bonus, pension, profit sharing, retirement, stock option,
hospitalization, group insurance or similar plan providing employee benefits
other than in the ordinary course of business, except as disclosed on Exhibit 3
to this Agreement, (c) any real or personal property lease other than in the
ordinary course of business or (d) deed of trust, mortgage, conditional sales
contract, security agreement, pledge agreement, trust receipt or any other
agreement subjecting any of the assets or properties of Reliance Technologies,
Inc. to a lien or encumbrance. Reliance Technologies, Inc. has performed all
obligations required to be performed by it under any of the contracts and leases
to which it is a party as of the Closing Date and is not in material breach
under any of the contracts, leases or other arrangements by which it is bound.
None of the parties with whom Reliance Technologies, Inc. has contractual
arrangements are in default of their obligations.
2.10. Changes in Compensation. Since the date of the Balance sheet, Reliance
Technologies, Inc. has not granted any general pay increase to employees or
changed the rate of compensation, commission or bonus payable to any officer,
employee, director, agent or stockholder, other than in the normal course of
business.
2.11. Records. All of the account books, minute books, stock certificate books
and stock transfer ledgers of Reliance Technologies, Inc. are current and
accurate.
2.12. Authority. The execution and performance of this Agreement have been duly
authorized by all requisite corporate action. This Agreement constitutes a valid
and binding obligation of Reliance Technologies, Inc. and the Shareholders in
accordance with its terms. No provision of the articles of incorporation,
bylaws, minutes, share certificates or contracts prevents Reliance Technologies,
Inc. and/or the Shareholders from delivering the Reliance Technologies, Inc.
shares to CBQ in the manner contemplated under the Plan.
3
<PAGE>
2.13. Taxes. Reliance Technologies, Inc. has filed all income tax returns and,
in each jurisdiction where qualified or incorporated, all income tax and
franchise tax returns that are required to be filed. Reliance Technologies, Inc.
has paid all taxes as shown on the returns as have become due, and has paid all
assessments received that have become due.
2.14. Brokers. All negotiations on the part of Reliance Technologies, Inc. and
the Shareholders related to the Plan have been accomplished solely by Reliance
Technologies, Inc. and the Shareholders without the assistance of any person
employed as a broker or finder. Reliance Technologies, Inc. and the Shareholders
have done nothing to give rise to any valid claims for a broker's commission,
finder's fee or any similar charge.
2.15. Full Disclosure. As of the Closing Date, Reliance Technologies, Inc. and
the Shareholders have disclosed all events, conditions and facts materially
affecting the business and prospects of Reliance Technologies, Inc. The
Shareholders and Reliance Technologies, Inc. have not withheld knowledge of any
event, condition or fact that they have reasonable grounds to know may
materially affect the business and prospects of Reliance Technologies, Inc. None
of the representations and warranties made by the Shareholders or Reliance
Technologies, Inc. in this Agreement or in any instrument, writing or other
document furnished to CBQ contains any untrue statement of a material fact, or
fails to state a material fact.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.01. Organization and Standing. CBQ is a corporation duly organized, validly
existing and in good standing under the laws of Colorado, with all corporate
powers necessary to own property and carry on its business as it is now being
conducted. Copies of the articles of incorporation and bylaws of CBQ delivered
to the Shareholders and Reliance Technologies, Inc. herewith are complete and
accurate as of the Closing Date.
3.02. Subsidiaries. CBQ has subsidiaries.
3.03. Capitalization. CBQ has an authorized capitalization consisting of
500,000,000 common shares, $.0001 par value per share, and 100,000,000 preferred
shares, $.001 par value per share. As of the Closing Date, the number of common
shares and preferred shares outstanding is as set forth in the Form 8K-A as of
February 2, 1999; all of which issued and outstanding shares are fully paid for
and non assessable. CBQ has granted and registered 280,000 S-8 options; and
granted, subject to vesting, 300,000 options to outside parties at an option
price of closing market bid price or greater.
3.04. Due Delivery. The CBQ Shares issued to the Shareholders have been validly
authorized and issued and are fully paid for and non assessable. No CBQ
shareholder has any preemptive right of subscription or purchase with respect to
these shares.
3.05. Authority. The execution and performance of this Agreement have been duly
authorized by all requisite corporate action. This Agreement constitutes a valid
and binding obligation of CBQ in accordance with its terms. No provision of the
articles of incorporation, bylaws, minutes, share certificates or contracts
prevents CBQ from delivering the CBQ shares in the manner contemplated under the
Plan.
4
<PAGE>
3.06. Brokers. All negotiations on the part of CBQ related to the Plan have been
accomplished solely by CBQ without the assistance of any person employed as a
broker or finder. CBQ has done nothing to give rise to any valid claims for a
broker's commission, finder's fee or any similar charge.
3.07. Full Disclosure. As of the Closing Date, CBQ has disclosed all events,
conditions and facts materially affecting the business and prospects of CBQ, and
CBQ has not withheld knowledge of any event condition or fact that it has
reasonable grounds to know may materially affect the business and prospects of
CBQ. None of the representations and warranties made by CBQ in this Agreement or
in any instrument, writing or other document furnished to the Shareholders or
Reliance Technologies, Inc. contains any untrue statement of a material fact, or
fails to state a material fact.
ARTICLE IV
SURVIVAL OF WARRANTIES AND WARRANTIES
4.01. Nature and Survival of Representations and Warranties. All statements of
fact contained in this Agreement or in any memorandum, certificate, letter,
document or other instrument delivered by or on behalf of any of the parties
hereto to any other party pursuant to this Agreement shall be deemed
representations and warranties made by the delivering party to the other parties
under this Agreement. The covenants, representations and warranties of the
parties shall survive the Closing Date for a period of one year, and then they
shall lapse and be of no further effect.
4.02. Expenses. The parties to this Agreement shall pay their own expenses
incurred hereunder and in regards of the transactions contemplated hereby,
including, but not limited to, all fees and expenses of their respective counsel
and accountants.
ARTICLE V
COMPLIANCE WITH SECURITIES LAWS
5.01. Acknowledgments of the Shareholders. The Shareholders acknowledge,
understand and agree that: (a) The certificates representing the CBQ Shares will
each bear a legend restricting transfer in accordance with the exemptions from
registration under the Securities Act of 1933, as amended, which CBQ has relied
upon in the issuance of the CBQ Shares. (b) The CBQ Shares have not been
registered under the Securities Act of 1933, as amended, or any applicable state
law (collectively, the Securities Act). (c) The CBQ Shares may not be sold,
offered for sale, transferred, pledged, hypothecated or otherwise disposed of
except in compliance with the Securities Act of 1933 or 1934. (d) The legal
consequences of the foregoing mean that the Shareholders must bear the economic
risk of the investment in the CBQ Shares for the requisite period of time. (e)
No federal or state agency has made any finding or determination as to the
fairness of an investment in CBQ, or any recommendation or endorsement of this
investment.
5
<PAGE>
5.02. Further Representations and Warranties of Shareholders. Shareholders each
individually represent and warrant to CBQ as follows: (a) I have the financial
ability to bear the economic risks of my investment, have adequate means of
providing for my current needs and personal contingencies, and have no need for
liquidity in this investment; and, further, I have evaluated the high risks of
investing in CBQ and have such knowledge and experience in financial and
business matters in general and in particular with respect to this type of
investment that I am capable of evaluating the merits and risks of an investment
in the CBQ Shares. (b) I have been given the opportunity to ask questions of and
receive answers from CBQ concerning the terms and conditions of this investment,
and to obtain additional information necessary to verify the accuracy of the
information I desired in order to evaluate my investment, and in evaluating the
suitability of this investment I have not relied upon any representation or
other information (whether oral or written), other than that furnished to me by
CBQ or its representatives; further, I have had the opportunity to discuss with
my professional, legal, tax and financial advisers the suitability of an
investment in the CBQ Shares for my particular tax and financial situation; and,
further, in making the decision to purchase the CBQ Shares, I have relied solely
upon independent investigations made by me or on my behalf. (c) I am acquiring
the CBQ Shares solely for my own personal account, for investment purposes only,
and am not purchasing with a view to, or for, the resale, distribution,
subdivision or fractionalization thereof.
ARTICLE VI
MISCELLANEOUS
6.01. Amendments. This Agreement may be amended or modified at any time, but
only by an instrument in writing executed by Reliance Technologies, Inc., CBQ
and each of the individual Shareholders.
6.02. Waiver. The Shareholders of Reliance Technologies, Inc. and/or CBQ may, in
writing, (a) extend the time for performance of any of the obligations of any
other party to this Agreement, (b) waive any inaccuracies or misrepresentations
contained in this Agreement or in any document delivered pursuant to this
Agreement by any other party and/or (c) waive compliance with any of the
covenants, or performance of any obligations, contained in this Agreement by any
other party.
6.03. Assignment. (a) Neither this Agreement nor any right created hereby shall
be assignable by any party without the prior written consent of the other
parties, except by the laws of succession. (b) This Agreement shall be binding
on and inure to the benefit of the respective successors and assigns of the
parties. Nothing in this Agreement, expressed or implied, is intended to confer
upon any person, other than the parties and their permitted successors and
assigns, any rights or remedies under this Agreement.
6.04. Notices. Any notice or other communication required or permitted by this
Agreement must be in writing and shall be deemed to be properly given when
delivered in person to an officer of the other party, or to the party
individually when deposited in the U.S. Mails for transmittal by certified or
registered mail, postage prepaid, or when deposited with a public telegraph
company for transmittal, charges prepaid, or when delivered via facsimile;
provided, however, that the communication is addressed as follows:
6
<PAGE>
(a) in case of Reliance Technologies, Inc. and the Shareholders:
4851 Keller Spring Road
Suite 228
Addison, TX 75001; (972) 381-1353; and
(b) in case of CBQ:
4851 Keller Springs Rd.
Suite. 213
Addison, Texas 75001; (972) 732-1100
6.05. Headings. Paragraph and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
6.06. Entire Agreement. This Agreement contains the entire agreement between the
parties relating to the subject matter hereof. It may be executed in any number
of counterparts, but the aggregate of such counterparts constitute only one and
the same instrument.
6.07. Partial Invalidity. In the event that any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if it never contained any such invalid, illegal or unenforceable
provisions.
6.08. Controlling Law. The validity, interpretation and performance of this
Agreement shall be controlled by and construed under the laws of the State of
Texas, and venue for any lawsuit shall be in Dallas County, Texas.
6.09. Attorney's Fees. If any action at law or in equity, including any action
for declaratory relief, is brought to enforce or interpret the provisions of
this Agreement, the prevailing party shall be entitled to recover reasonable
attorney's fees from the other party. The attorney's fees may be ordered by the
court in the trial of any action described in this paragraph or may be enforced
in a separate action brought for determining attorney's fees.
6.10. Specific Performance. The parties declare that it is impossible to measure
in money the damages that will accrue to a party or its successors as a result
of any other parties' failure to perform any of the obligations under this
Agreement; therefore, if a party or its successor institutes any action or
proceeding to enforce the provisions of this Agreement, any party opposing such
action or proceeding agrees that specific performance may be sought and obtained
for any breach of this Agreement.
6.11. Arbitration. Any dispute relating to the interpretation or performance of
this Agreement shall be resolved at the request of either party through binding
arbitration. Arbitration shall be conducted in Dallas, Texas in accordance with
the then-existing rules of the American Arbitration Association. Judgment upon
any award by the arbitrators may be entered by any state or federal court having
jurisdiction. It is the intent of the parties to this Agreement that to
arbitrate be irrevocable.
7
<PAGE>
Purchaser: CBQ, Inc.:
By:
-----------------------
Michael L. Sheriff, CEO
Acquired Corporation: Reliance Technologies, Inc.
By:
-----------------------
Name:
---------------------
Title:
--------------------
Shareholders or Shareholder Agent:
By: By:
----------------------- -----------------------
Shareholder Shareholder
By: By:
----------------------- -----------------------
Shareholder Shareholder
By: By:
----------------------- -----------------------
Shareholder Shareholder
*
By: By:
----------------------- -----------------------
Shareholder Shareholder
By: By:
----------------------- -----------------------
Shareholder Shareholder
By: By:
----------------------- -----------------------
Shareholder Shareholder
By: By:
----------------------- -----------------------
Shareholder Shareholder
By: By:
----------------------- -----------------------
Shareholder Shareholder
8
<PAGE>
Exhibit 1
Subscriptions, Options, Contracts, Commitments or Demands
relating to the Capital Stock of Reliance Technologies, Inc.
Acquired Corporation: Reliance Technologies, Inc.
By:
---------------------
Name:
-------------------
Title:
------------------
<PAGE>
Exhibit 2
Payments in the form of Royalties, Fees or otherwise to any owner
of any Patent, Trademark, Trade Name or Copyright
Acquired Corporation: Reliance Technologies, Inc.
By:
----------------------
Name:
--------------------
Title:
-------------------
<PAGE>
EXHIBIT 3
Bonus, Pension, Profit Sharing, Retirement, Stock Option Plans
Acquired Corporation: Reliance Technologies, Inc.
By:
----------------------
Name:
--------------------
Title:
-------------------
<PAGE>
Exhibit 4
The Reliance Technology Stock Option Plan
<PAGE>
Exhibit 10.2
(Priority One Acquisition Contract)
PLAN AND AGREEMENT OF REORGANIZATION
under
SECTION 368(b) of the Internal Revenue Code
THIS AGREEMENT has been made and entered into this 9th day of April, 1999
(Closing Date), and is by and between, on the first part, CBQ, Inc., a publicly
held and traded Colorado corporation (CBQI), and, on the second part, Priority
One Electronic Commerce Corporation, a privately held Pennsylvania corporation
(POECC), and the shareholders of POECC (collectively, the Shareholders). The
following premises are an integral part of this agreement.
1. The Shareholders currently own all of the outstanding proprietary interest of
POECC (POECC Shares).
2. The Shareholders desire to sell, transfer and convey the POECC Shares to CBQI
solely in exchange for 900,000 restricted common shares of CBQI (CBQI Shares).
3. CBQI desires to acquire the POECC Shares solely in exchange for the CBQI
Shares.
4. CBQI, POECC and the Shareholders desire to effect the foregoing conveyances
and transfers of the CBQI and POECC Shares on a tax free basis pursuant to the
provisions of Section 368(b) of the Internal Revenue Code (IRC).
THE PARTIES, THEREFORE, hereby adopt this plan and reorganization agreement
(Agreement) under the IRC and agree as follows:
ARTICLE I
TRANSFER AND CONVEYANCE OF THE CBQI AND POECC SHARES; CONSULTING AGREEMENT
1.1 Transfer and Conveyance of Shares. Subject to all of the terms, conditions,
representations, warranties and covenants set forth herein, the Shareholders
hereby sell, transfer and convey (without reservation and free and clear from
all encumbrances) to CBQI the POECC Shares and CBQI hereby sells, transfers and
conveys (without reservation and free and clear from all encumbrances) to the
Shareholders the CBQI Shares.
1.2 Consulting Agreement of Mr. Lieberman. Mr. Sidney Lieberman has agreed to
serve CBQI as a consultant in exchange for an option to acquire 100,000 shares
of the common stock of CBQI at the market price therefor on the date of this
agreement, the market price being agreed as $3.00 per share. The common shares
which CBQI shall issue to Mr. Lieberman upon exercise of his option, in whole or
in part and from time to time and at any time, shall be forthwith registered by
CBQI under the Securities Act of 1933, as amended, using Form S 8.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. Representations, Warranties and Covenants of CBQI. CBQI represents and
warrants to the Shareholders, jointly and severally, as of the Closing Date as
follows: (a) All necessary action has been taken to make this Agreement a legal,
valid and binding obligation of CBQI enforceable in accordance with its terms
and conditions.
(b) The execution and delivery of this Agreement and the performance by CBQI of
its obligations hereunder will not result in any material breach or violation of
or material default under any material agreement, indenture, lease, license,
mortgage, instrument, or understanding, nor result in any violation of any law,
rule, regulation, statute, order or decree of any kind, to which CBQI or any of
its affiliates is a party or by which they or any of their property is or may be
or become subject, nor in the violation of the articles or bylaws governing the
conduct of CBQI.
(c) CBQI has delivered to POECC and the Shareholders its: (1) annual reports on
Form 10 KSB for the years ended December 31, 1997, and December 31, 1998; (2)
quarterly reports on Form 10 QSB for the fiscal quarters ended March 31, 1998,
June 30, 1998, and September 30, 1998, and (3) periodic report on Form 8 KSB
dated November 19, 1998 (as well as the amendment thereto), all of which were
true and correct as of the date of filing and remain true and correct in all
material respects as of the date hereof. CBQI has made no further filings under
the Securities Exchange Act of 1934, as amended, since its filing on Form 10 KSB
dated December 31, 1998. CBQI has also provided to POECC and the Shareholders
full access to any and all information they desired concerning the business and
operations of CBQI, and CBQI has made available to POECC and the Shareholders
such personnel as have been requested to answer any and all questions which
POECC and the Shareholders may have had concerning their investment in CBQI.
<PAGE>
(d) CBQI shall continue to file for so long as the CBQI Shares are restricted
securities under Rule 144 of the Securities Act such reports as are required
from time to time of CBQI under the Securities Exchange Act of 1934, as amended,
so as to allow for the sale of the CBQI Shares by the Shareholders under said
Rule 144.
(e) The CBQI Shares have each been validly issued and are fully paid for and
nonassessable.
(f) The CBQI Shares are not and shall not be or become subject to any lien,
encumbrance, security interest or financing statement whatsoever. Further, the
CBQI Shares are not the subject of any other agreement in regards thereof.
(g) CBQI has delivered an opinion of its counsel to the effect that the CBQI
Shares have been validly issued and are fully paid for and nonassessable.
(h) CBQI since the date of those reports filed as specified in paragraph 2.1(c)
of this Agreement has not suffered any material and adverse change in its
financial condition, working capital, assets, liabilities, reserves, business,
operations or prospects.
(i) There is no legal, administrative, arbitration or other proceeding, claim or
action of any nature or investigation pending or threatened against or involving
CBQI, or which questions or challenges the validity of this Agreement, or any
action to be taken by CBQI pursuant to this Agreement or in connection with the
transactions contemplated hereby, and CBQI does not know or have any reason to
know of any valid basis for any such legal, administrative, arbitration or other
proceeding, claim or action of any nature or investigation. CBQI is not subject
to any judgment, order or decree entered in any lawsuit or proceeding which has
an adverse effect on its business practices or on its ability to acquire any
property or conduct its business in any area.
(j) No representations or warranties by CBQI in this Agreement and no statement
contained in any document (including, without limitation, those which may be
attached hereto), certificate, or other writing furnished by CBQI to POECC or
the Shareholders pursuant to the provisions hereof or in connection with the
transactions contemplated hereby, contain any untrue statement of material fact
or omit to state any material fact necessary in order to make the statements
herein or therein, in light of the circumstances under which they were made, not
misleading; further, there are no facts known to CBQI which (either individually
or in the aggregate) could or would materially and adversely affect or involve
any substantial possibility of having a material, adverse effect upon the
condition (financial or otherwise), results of operations, assets, liabilities
or businesses of CBQI which have not been disclosed in this Agreement.
(k) CBQI specifically acknowledges and represents that the closing hereunder
was, in effect, simultaneously completed on the effective date hereof.
2.2 Representations, Warranties and Covenants of POECC and the Shareholders.
POECC and the Shareholders each hereby represents and warrants, jointly and
severally, to CBQI as of the Closing Date as follows:
(a) All necessary action has been taken to make this Agreement a legal, valid
and binding obligations of POECC and the Shareholders enforceable in accordance
with its terms and conditions.
(b) The execution and delivery of this Agreement and the performance by POECC
and the Shareholders of their respective obligations hereunder will not result
in any material breach or violation of or material default under any material
agreement, indenture, lease, license, mortgage, instrument, or understanding,
nor result in any violation of any law, rule, regulation, statute, order or
decree of any kind, to which either POECC and/or the Shareholders or any of
their respective affiliates is a party or by which they or any of them or any of
their property is or may be or become subject, nor in the violation of the
articles or bylaws governing the conduct of either POECC or the Shareholders.
<PAGE>
(c) POECC and the Shareholders have delivered to CBQI compiled financial
statements of POECC as of and for the period ended December 31, 1997, a copy of
which is attached to this Agreement. POECC shall subsequently forthwith deliver
compiled financial statements as of and for the period ended December 31, 1998.
The foregoing POECC financial statements shall be prepared, if they have not
already been so, in order to provide, at a minimum, (1) balance sheets dated as
of December 31, 1997, and December 31, 1998; (2) statements of operations for
the one year periods ended December 31, 1996, December 31, 1997, and December
31, 1998; (3) statements of cash flows for the one year periods ended December
31, 1996, December 31, 1997, and December 31, 1998; and (4) a statement of
stockholders' equity from inception through December 31, 1998. The POECC
financial statements attached to this Agreement and which shall be subsequently
delivered (1) are and will be true, accurate and complete; (2) have been and
will be prepared from all relevant books and records pertaining to POECC; (3)
have been or will be prepared in accordance with Generally Accepted Accounting
Principles applied on a consistent basis; and (4) have been or will be prepared
in accordance with Regulation S X under the general rules and regulations
promulgated by the Securities and Exchange Commission pursuant to the authority
granted this governmental agency under the Securities Act of 1933, as amended,
and the Securities Exchange Act of 1934, as amended. The POECC financial
statements undertaken by POECC and the Shareholders to be delivered in
accordance with this Agreement shall be subsequently submitted by the Company to
an audit by the independent auditing firm of the Company. These financial
statements are capable of being audited, no material and adverse changes shall
occur as a result of any adjustments provided by said auditor and the opinion
for these financial statements shall not be qualified in any respect.
The foregoing financial statements will show that POECC has no liabilities of
any kind whatsoever, other than those liabilities which have been satisfied as
of the Closing Date and those obligations to Shareholders, including Mr.
Lieberman and/or his affiliates, which have been satisfied as of the Closing
Date. POECC has acquired, as of the Closing Date and free and clear of all
liens, obligations, rights and other commitments, common shares in CITX, Inc.,
which aggregate 10% of the outstanding common shares of CITX. Further, as of the
Closing Date, POECC has no debt obligation for borrowed money, including
guarantees of or agreements to acquire any such debt obligation of others and
POECC has no outstanding loan to any person.
POECC has not suffered, since December 31, 1997, and to the Closing Date, any
material and adverse change in its financial condition, working capital, assets,
liabilities, reserves, business, operations or prospects.
(d) POECC has no employment agreement with any officer, employee or agent. POECC
is not restricted by agreement from carrying on its business or any part thereof
anywhere in the world or from competing in any line of business with any person.
POECC has no obligation or liability as guarantor, surety, co signor, endorser,
co maker, indemnitor or otherwise in respect of the obligation of any other
person. POECC is not subject to any obligation or requirement to provide funds
to or make any investment (in the form of a loan, capital contribution or
otherwise) in any person. POECC is not a party to any agreement, contract,
commitment or loan to which any of its officers or directors or any affiliate of
POECC or its officers and directors is a party.
(e) POECC has delivered an accurate and complete list of all leases pursuant to
which POECC leases any real or personal property. POECC has also delivered an
accurate and complete list of all licenses pursuant to which POECC licenses or
has acquired the right to use any software or other intangible property. All
such leases and licenses are valid, binding and enforceable in accordance with
their terms, and are in full force and effect. There are no existing defaults by
POECC or any other party under these leases, and no event of default has
occurred which (whether with or without notice, lapse of time or the happening
or occurrence of any other event) would constitute a default thereunder. Any
consents under these leases or licenses have been acquired.
(f) POECC has delivered a list of the customers of POECC showing the approximate
total sales by POECC to each customer during the fiscal year ended December 31,
1988. There has been no adverse change in the business relationship of POECC
with any customer which is material to the consolidated financial condition or
operations of Target.
(g) POECC has duly filed all federal, state and local tax reports and returns
required to be filed by it and has duly paid all taxes and other charges due or
claimed to be due from it by federal, state, local and foreign taxing
authorities. There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any federal, state, local, or
foreign tax return or report for any period.
<PAGE>
(h) All accounts receivable of POECC represent sales actually made in the
ordinary course of business, and are current and collectible.
(i) There is no legal, administrative, arbitration or other proceeding, claim or
action of any nature or investigation pending or threatened against or involving
POECC, or which questions or challenges the validity of this Agreement, or any
action to be taken by POECC pursuant to this Agreement or in connection with the
transactions contemplated hereby, and POECC does not know or have any reason to
know of any valid basis for any such legal, administrative, arbitration or other
proceeding, claim or action of any nature or investigation. POECC is not subject
to any judgment, order or decree entered in any lawsuit or proceeding which has
an adverse effect on its business practices or on its ability to acquire any
property or conduct its business in any area.
(j) The POECC Shares have each been validly issued and are fully paid for and
nonassessable.
(k) The POECC Shares are not and shall not be or become subject to any lien,
encumbrance, security interest or financing statement whatsoever. Further, the
POECC Shares are not the subject of any other agreement in regards thereof.
(l) The POECC Shares represent 100% of the outstanding proprietary interest of
POECC, and there are no outstanding commitments (direct or indirect) which would
cause the issuance or transfer out of treasury of any additional proprietary
interest of POECC, whether common stock, preferred stock or debt.
(m) The Shareholders and POECC have provided to CBQI full access to any and all
information it desired concerning the business and operations of the
Shareholders and/or POECC, and the Shareholders and POECC have made available to
CBQI such personnel as has been requested to answer any and all questions which
CBQI may have had concerning its investment in POECC.
(n) CBQI has delivered an opinion of its counsel to the effect that the CBQI
Shares have been validly issued and are fully paid for and nonassessable.
(o) No representations or warranties by POECC in this Agreement and no statement
contained in any document (including, without limitation, financial statements),
certificate, or other writing furnished by POECC or the Shareholders to CBQI
pursuant to the provisions hereof or in connection with the transactions
contemplated hereby, contain any untrue statement of material fact or omit to
state any material fact necessary in order to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading; further, there are no facts known to POECC which (either
individually or in the aggregate) could or would materially and adversely affect
or involve any substantial possibility of having a material, adverse effect upon
the condition (financial or otherwise), results of operations, assets,
liabilities or businesses of POECC which have not been disclosed in this
Agreement.
(p) POECC and the Shareholders each specifically acknowledge and represent that
the closing hereunder was, in effect, simultaneously completed on the effective
date hereof.
2.3 Understandings of the Shareholders. The Shareholders acknowledge, understand
and agree that:
(a) The certificate representing the CBQI Shares will bear a legend restricting
its transfer under Rule 144 of the Securities Act of 1933, as amended, and will
be issued solely in the name of the Shareholders.
<PAGE>
(b) The CBQI Shares have not been registered under the Securities Act of 1933,
as amended, or any applicable state law (collectively, the Securities Act);
further, the CBQI Shares may not be sold, offered for sale, transferred,
pledged, hypothecated or otherwise disposed of except in compliance with the
Securities Act; further, CBQI has no obligation, and does not intend, to cause
the CBQI Shares to be registered under the Securities Act, or to comply with any
exemption under the Securities Act that would permit a sale or sales of all or
any portion of the CBQI Shares; further, the legal consequences of the foregoing
mean that the Shareholders must bear the economic risk of the investment in the
CBQI Shares for an indefinite period of time; and, further, if the Shareholders
desire to sell or transfer all or any part of the CBQI Shares within the
restricted period, CBQI may require the Shareholders' counsel to provide a legal
opinion that the transfer may be made without registration under the Securities
Act.
(c) No federal or state agency has made any findings or determination as to the
fairness of an investment in CBQI, or any recommendation or endorsement of this
investment.
(d) There is presently only an extremely limited market for the CBQI Shares and
no market may exist in the future for any sale or sales of all or any portion
thereof.
(e) Their commitments to investments that are not readily marketable are not
disproportionate to their net worth, and their investment in the CBQI Shares
will not cause such overall commitment to become excessive.
(f) They have the financial ability to bear the economic risks of this
investment, have adequate means of providing for their current needs, and have
no need for liquidity in this investment.
(g) They have evaluated the high risks of investing in the CBQI Shares and have
such knowledge and experience in financial and business matters in general and
in particular with respect to this type of investment that they are capable of
evaluating the merits and risks of an investment in the CBQI Shares.
(h) They have been given the opportunity to ask questions of and receive answers
from CBQI concerning the terms and conditions of this investment, and to obtain
additional information necessary to verify the accuracy of the information they
desired in order to evaluate their investment, and in evaluating the suitability
of an investment in the CBQI Shares have not relied upon any representations or
other information (whether oral or written) other than that furnished to them by
CBQI or the representatives of CBQI.
(i) They have had the opportunity to discuss with their professional, legal, tax
and financial advisers the suitability of an investment in the CBQI Shares for
its particular tax and financial situation and all information that they have
provided to CBQI concerning themselves and their financial position is correct
and complete as of the date set forth below.
(j) In making the decision to purchase the CBQI Shares they have relied solely
upon independent investigations made by them or on their behalf.
(k) They are acquiring the CBQI Shares solely for their own account, for
investment purposes only, and are not purchasing with a view to, or for, the
resale, distribution, subdivision or fractionalization thereof.
<PAGE>
ARTICLE III
MISCELLANEOUS
3.1. Entire Agreement; Modification. This Agreement sets forth and constitutes
the entire agreement between the parties hereto with respect to the subject
matter hereof, and supersedes any and all prior agreements, understandings,
promises, warranties, covenants and representations made by any party to the
other concerning the subject matter hereof and the terms applicable hereto. This
Agreement may not be released, discharged, amended or modified in any manner
except by an instrument in writing signed by duly authorized representations of
the parties hereto.
3.2. Severability. The invalidity or unenforceabilty of one or more provisions
of this Agreement shall not affect the validity or enforceability of any of the
other provisions hereof, and this Agreement shall be construed in all respects
as if such invalid or unenforceable provisions are omitted.
3.3. Governing Law. This Agreement shall be deemed to have been entered into and
shall be construed and enforced in accordance with the laws of the State of
Texas.
3.4. Waivers. The failure of any party hereto to insist, in any one or more
instances, upon the performance of any of the terms, covenants or conditions of
this Agreement or to otherwise exercise any right hereunder, shall not be
construed as a waiver or relinquishment of the future performance of any such
term, covenant or condition or the future exercise of such right, but the
obligations of the party with respect to such future performance shall continue
in full force and effect.
3.5. Headings. The headings in the articles, section and paragraphs used in this
Agreement are included for convenience only and are not to be used in construing
or interpreting this Agreement.
3.6. Notice. All notices, demands, or requests hereunder shall be in writing and
served either personally, by certified mail, return receipt requested, by
Federal Express or other reputable overnight courier, or by facsimile, as
follows:
If to CBQI:
CBQ, Inc.
4851 Keller Springs Rd., Ste. 213
Dallas TX 75248
(972) 732 1169: FAX
If to POECC or the Shareholders:
Priority One Electronic Commerce Corporation
c/o Mr. Sidney Lieberman
8699 Egret Isle Terrace
Lake Worth FL 33467
(561) 964 1233: FAX
3.7. Successor and Assigns. This Agreement, and each and every provision
thereof, shall be binding upon and shall inure to the benefit of the parties,
their respective successors, successors-in-title, heirs and assigns, and each
and every successor-in-interest to any party, whether such successor acquires
such interest by way of gift, purchase, foreclosure, or by any other legal
method, who shall hold such interest subject to all the terms and conditions of
this Agreement.
<PAGE>
3.8. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but such counterparts shall together
constitute one and the same instrument.
3.9. Attorneys' Fees. In the event of any dispute with respect to this
Agreement, the prevailing party shall be entitled to its reasonable attorneys'
fees and other costs and expenses incurred in resolving such dispute.
3.10. Expenses. Each party shall pay the expenses incurred by them under or in
connection with this Agreement, including counsel fees and expenses of their
respective representatives.
3.11. Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants of CBQI, PEOC and the Shareholders
contained in this Agreement shall survive the execution hereof, and shall be
unaffected by any investigation made by any party at any time.
3.12. Further Assurances. At any time and from time to time after the date of
this Agreement, each party shall execute such additional instruments and take
such other and further action as may be reasonably requested by any other party
or otherwise to carry out the intent and purpose of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered the date first above written.
CBQ, INC., a Colorado corporation
By: /s/ Michael Sheriff
Michael Sheriff, CEO
PRIORITY ONE ELECTRONIC COMMERCE CORPORATION, a Pennsylvania corporation
By: /s/ Sidney Lieberman
Sidney Lieberman, President
SHAREHOLDERS:
Sidney Lieberman Revocable Trust Lenora J. Spera Trust
By: /s/ Sidney Lieberman By: /s/ Sidney Lieberman
Trustee Trustee
Howard Frank, Individually Bernie Roemmele, Individually
/s/ Howard Frank /s/ Bernie Roemmele
Howard Frank Bernie Roemmele
Randall King, Individually Timothy Classen, Individually
/s/ Randall King /s/ Timothy Classen
Randall King Timothy Classen
Richard Bergey, Individually Barbara Riehl, Individually
/s/ Richard Bergey /s/ Barbara Riehl
Richard Bergey Barbara Riehl
<PAGE>
Exhibit 10.3
(Global Logistics Partners Acquisition Contract)
AGREEMENT OF PURCHASE
This plan and agreement of purchase (Plan) has been entered into in Dallas,
Texas, this 11th day of May, 1999, between CBQ, Inc., a Colorado corporation
referred to in this Agreement as either the Purchaser or CBQ, and Global
Logistics Partners, L.L.C., a Texas corporation sometimes referred to in this
agreement as Global or Seller.
CBQ will acquire (at the Closing) from Global 19% of the issued and outstanding
capital stock of Global Logistics Partners, L.L.C. in exchange for shares of
voting stock of CBQ.
ARTICLE I
EXCHANGE OF VOTING CAPITAL STOCK
1.01. Transfer and Delivery of Global Logistics Partners, L.L.C. Shares. At the
closing Global will Issue and deliver to CBQ certificates evidencing 19% of the
issued and outstanding Capital stock of Global Logistics Partners, L.L.C., in
the name of CBQ, Inc.
1.02. Issuance and Delivery of CBQ Shares. In exchange for the transfer by
Global to CBQ of 19% of the issued and outstanding Global Logistics Partners,
L.L.C. capital shares hereunder, CBQ will forthwith cause to be issued and
delivered to the Global 4,233,200 restricted common shares of CBQ (Collectively,
the CBQ Shares).
1.03. Additional Consideration for Issuance of CBQ Shares. As additional
consideration for CBQ entering into this agreement Rick Williamson (the
President and Major Shareholder of Global Logistics Partners, L.L.C.) agrees to
sit on the Board of Directors of CBQ, Inc., and to be appointed as President/CEO
of CBQ and its Subsidiary Cyberquest, Inc., (a Colorado Corporation.). In
addition he will form a management team which will include a CFO, Sales Manager,
and additional management personnel to cover all aspects of building CBQ and
BID4IT into a world class Internet auction site for Business to Business
transactions. CBQ shall make additional seats available on its Board of
Directors for nominees selected by Mr. Williamson. Mr. Williamson shall fund
(through loans or equity investments) the on going operations of CBQ.
1.04. Closing Date. The Closing Date will be May 10, 1999 at 4:00 PM at the
offices of CBQ in Dallas, Texas unless otherwise determined by Mutual agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS AND ACQUIRED CORPORATION
2.01. Organization and Standing. Global Logistics Partners, L.L.C. is a
corporation duly organized, validly existing and in good standing under the laws
of Texas, with all Corporate powers necessary to own property and carry on its
business as it is now being conducted. Copies of the articles of incorporation
and bylaws of Global Logistics Partners, L.L.C. delivered to Purchaser herewith
are complete and accurate as of the Closing Date.
2.02. Capitalization. Global Logistics Partners, L.L.C. has an outstanding
capitalization, which is all in the hands of the Shareholders, all of which has
been fully paid for and is non assessable. There are no outstanding
subscriptions, options, contracts, commitments or demands relating to the
capital stock of Global Logistics Partners, L.L.C. or any other agreements of
any character under which Global Logistics Partners, L.L.C. or the Shareholders
would be obligated to issue or purchase shares of Global Logistics Partners,
L.L.C. capital stock, except as described and disclosed on Exhibit 1 to this
Agreement.
<PAGE>
2.03. Litigation. Global Logistics Partners, L.L.C. is not a party to, nor has
it been threatened with, any litigation or governmental proceeding that, if
decided adversely to it, would have a material and adverse effect on its
operations or business, or on the financial condition, net worth, prospects or
business of Global Logistics Partners, L.L.C. To the best of the Global
Logistics Partners, L.L.C.'s knowledge, it is not aware of any facts that might
result in any action, suit or other proceeding that would result in any material
and adverse change in the business or financial condition of Global Logistics
Partners, L.L.C.
2.04. Compliance with Law and Instruments. The business and operations of Global
Logistics Partners, L.L.C. are not infringing on or otherwise acting adversely
to any copyrights, trademark rights, patent rights or licenses owned by any
other person, and there is not any pending claim or threatened action with
respect to such rights. Global Logistics Partners, L.L.C. is not obligated to
make any payments in the form of royalties, fees or otherwise to any owner of
any patent, trademark, trade name or copyright, except as set forth on Exhibit
2.
2.05. Authority. The execution and performance of this Agreement have been duly
authorized by all requisite corporate action. This Agreement constitutes a valid
and binding obligation of Global Logistics Partners, L.L.C. and the Shareholders
in accordance with its terms. No provision of the articles of incorporation,
bylaws, minutes, share certificates or contracts prevents Global Logistics
Partners, L.L.C. and/or the Shareholders from delivering the Global Logistics
Partners, L.L.C. shares to CBQ in the manner contemplated under the Plan.
2.06. Taxes. Global Logistics Partners, L.L.C. has filed all income tax returns
and, in each jurisdiction where qualified or incorporated, all income tax and
franchise tax returns that are required to be filed. Global Logistics Partners,
L.L.C. has paid all taxes as shown on the returns as have become due, and has
paid all assessments received that have become due.
2.07. Brokers. All negotiations on the part of Global Logistics Partners, L.L.C.
and the Shareholders related to the Plan have been accomplished solely by Global
Logistics Partners, L.L.C. and the Shareholders without the assistance of any
person employed as a broker or finder. Global Logistics Partners, L.L.C. and the
Shareholders have done nothing to give rise to any valid claims for a broker's
commission, finder's fee or any similar charge.
2.08. Full Disclosure. As of the Closing Date, Global Logistics Partners, L.L.C.
and the Shareholders have disclosed all events, conditions and facts materially
affecting the business and prospects of Global Logistics Partners, L.L.C. The
Shareholders and Global Logistics Partners, L.L.C. have not withheld knowledge
of any event, condition or fact that they have reasonable grounds to know may
materially affect the business and prospects of Global Logistics Partners,
L.L.C. None of the representations and warranties made by the Shareholders or
Global Logistics Partners, L.L.C. in this Agreement or in any instrument,
writing or other document furnished to CBQ contains any untrue statement of a
material fact, or fails to state a material fact.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.01. Organization and Standing. CBQ is a corporation duly organized, validly
existing and in good standing under the laws of Colorado, with all corporate
powers necessary to own property and carry on its business as it is now being
conducted. Copies of the articles of incorporation and bylaws of CBQ delivered
to Global Logistics Partners, L.L.C. herewith are complete and accurate as of
the Closing Date. Global Logistics Partners has reviewed the latest 10KSB as
filed by CBQ for the period ended 12/31/98.
3.02. Subsidiaries. CBQ has subsidiaries.
3.03. Capitalization. The Capital structure of CBQ, Inc., is as set out in the
10KSB as filed for the period ending 12/31/98.
3.04. Due Delivery. The CBQ Shares issued to Global Logistics Partners LLC have
been validly authorized and issued and are fully paid for and non assessable. No
CBQ shareholder has any preemptive right of subscription or purchase with
respect to these shares.
<PAGE>
3.05. Authority. The execution and performance of this Agreement have been duly
authorized by all requisite corporate action. This Agreement constitutes a valid
and binding obligation of CBQ in accordance with its terms. No provision of the
articles of incorporation, bylaws, minutes, share certificates or contracts
prevents CBQ from delivering the CBQ shares in the manner contemplated under the
Plan.
3.06. Brokers. All negotiations on the part of CBQ related to the Plan have been
accomplished solely by CBQ without the assistance of any person employed as a
broker or finder. CBQ has done nothing to give rise to any valid claims for a
broker's commission, finder's fee or any similar charge.
3.07. Full Disclosure. As of the Closing Date, CBQ has disclosed all events,
conditions and facts materially affecting the business and prospects of CBQ, and
CBQ has not withheld knowledge of any event condition or fact that it has
reasonable grounds to know may materially affect the business and prospects of
CBQ. None of the representations and warranties made by CBQ in this Agreement or
in any instrument, writing or other document furnished to Global Logistics
Partners, L.L.C. contains any untrue statement of a material fact, or fails to
state a material fact.
ARTICLE IV
SURVIVAL OF WARRANTIES AND WARRANTIES
4.01. Nature and Survival of Representations and Warranties. All statements of
fact contained in this Agreement or in any memorandum, certificate, letter,
document or other instrument delivered by or on behalf of any of the parties
hereto to any other party pursuant to this Agreement shall be deemed
representations and warranties made by the delivering party to the other parties
under this Agreement. The covenants, representations and warranties of the
parties shall survive the Closing Date for a period of one year, and then they
shall lapse and be of no further effect.
4.02. Expenses. The parties to this Agreement shall pay their own expenses
incurred hereunder and in regards of the transactions contemplated hereby,
including, but not limited to, all fees and expenses of their respective counsel
and accountants.
ARTICLE V
COMPLIANCE WITH SECURITIES LAWS
5.01. Acknowledgments of the Shareholders. Global Logistics Partners LLC
acknowledges, understands and agrees that: (a) The certificates representing the
CBQ Shares will each bear a legend restricting transfer in accordance with the
exemptions from registration under the Securities Act of 1933, as amended, which
CBQ has relied upon in the issuance of the CBQ Shares. (b) The CBQ Shares have
not been registered under the Securities Act of 1933, as amended, or any
applicable state law (collectively, the Securities Act). (c) The CBQ Shares may
not be sold, offered for sale, transferred, pledged, hypothecated or otherwise
disposed of except in compliance with the Securities Act of 1933 or 1934. (d)
The legal consequences of the foregoing mean that Global must bear the economic
risk of the investment in the CBQ Shares for the requisite period of time. (e)
No federal or state agency has made any finding or determination as to the
fairness of an investment in CBQ, or any recommendation or endorsement of this
investment.
<PAGE>
ARTICLE VI
MISCELLANEOUS
6.01. Amendments. This Agreement may be amended or modified at any time, but
only by an instrument in writing executed by Global Logistics Partners, L.L.C.,
and CBQ.
6.02. Waiver. Global Logistics Partners, L.L.C. and/or CBQ may, in writing, (a)
extend the time for performance of any of the obligations of any other party to
this Agreement, (b) waive any inaccuracies or misrepresentations contained in
this Agreement or in any document delivered pursuant to this Agreement by any
other party and/or (c) waive compliance with any of the covenants, or
performance of any obligations, contained in this Agreement by any other party.
6.03. Assignment. (a) Neither this Agreement nor any right created hereby shall
be assignable by any party without the prior written consent of the other
parties, except by the laws of succession. (b) This Agreement shall be binding
on and inure to the benefit of the respective successors and assigns of the
parties. Nothing in this Agreement, expressed or implied, is intended to confer
upon any person, other than the parties and their permitted successors and
assigns, any rights or remedies under this Agreement.
6.04. Notices. Any notice or other communication required or permitted by this
Agreement must be in writing and shall be deemed to be properly given when
delivered in person to an officer of the other party, or to the party
individually when deposited in the U.S. Mails for transmittal by certified or
registered mail, postage prepaid, or when deposited with a public telegraph
company for transmittal, charges prepaid, or when delivered via facsimile;
provided, however, that the communication is addressed as follows:
in case of Global Logistics Partners, L.L.C. and the Shareholders:
6300 Ridglea Place
Suite 600
Fort Worth, TX 76116; (817) 737-6100; and
in case of CBQ:
4851 Keller Springs Rd.
Suite. 213
Addison, Texas 75001; (972) 732-1100
6.05. Headings. Paragraph and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
6.06. Entire Agreement. This Agreement contains the entire agreement between the
parties relating to the subject matter hereof. It may be executed in any number
of counterparts, but the aggregates of such counterparts constitute only one and
the same instrument.
<PAGE>
6.07. Partial Invalidity. In the event that any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if it never contained any such invalid, illegal or unenforceable
provisions.
6.08. Controlling Law. The validity, interpretation and performance of this
Agreement shall be controlled by and construed under the laws of the State of
Texas, and venue for any lawsuit shall be in Dallas County, Texas.
6.09. Attorney's Fees. If any action at law or in equity, including any action
for declaratory relief, is brought to enforce or interpret the provisions of
this Agreement, the prevailing party shall be entitled to recover reasonable
attorney's fees from the other party. The attorney's fees may be ordered by the
court in the trial of any action described in this paragraph or may be enforced
in a separate action brought for determining attorney's fees.
6.10. Specific Performance. The parties declare that it is impossible to measure
in money the damages that will accrue to a party or its successors as a result
of any other parties' failure to perform any of the obligations under this
Agreement; therefore, if a party or its successor institutes any action or
proceeding to enforce the provisions of this Agreement, any party opposing such
action or proceeding agrees that specific performance may be sought and obtained
for any breach of this Agreement.
6.11. Arbitration. Any dispute relating to the interpretation or performance of
this Agreement shall be resolved at the request of either party through binding
arbitration. Arbitration shall be conducted in Dallas, Texas in accordance with
the then-existing rules of the American Arbitration Association. Judgment upon
any award by the arbitrators may be entered by any state or federal court having
jurisdiction. It is the intent of the parties to this Agreement that to
arbitrate be irrevocable.
Purchaser: CBQ, Inc.:
By: /s/ Michael L. Sheriff
Michael L. Sheriff, CEO
Seller: Global Logistics Partners, L.L.C.
By: /s/ Rick Williamson
Name: Rick Williamson
Title: President
<PAGE>
ARTICLE 5
<TABLE>
<S> <C>
PERIOD-TYPE 3-MOS
FISCAL-YEAR-END DEC-31-1999
PERIOD-START JAN-01-1999
PERIOD-END MAR-31-1999
CASH 22,418
SECURITIES 0
RECEIVABLES 9,898
ALLOWANCES 0
INVENTORY 0
CURRENT-ASSETS 39,574
PP&E 225,709
DEPRECIATION 65,960
TOTAL-ASSETS 528,466
CURRENT-LIABILITIES 225,345
BONDS 0
PREFERRED-MANDATORY 0
PREFERRED 70
COMMON 3,640
OTHER-SE 132,116
TOTAL-LIABILITY-AND-EQUITY 528,466
SALES 18,852
TOTAL-REVENUES 18,852
CGS 0
TOTAL-COSTS 155,421
OTHER-EXPENSES 0
LOSS-PROVISION 0
INTEREST-EXPENSE 1,847
INCOME-PRETAX (136,569)
INCOME-TAX 0
INCOME-CONTINUING (136,569)
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME (136,569)
EPS-PRIMARY (.001)
EPS-DILUTED (.001)
</TABLE>
2.e Periodic report on Form 8KSB dated February 2, 1999, amending Form 8KSB
dated November 19, 1998 (Amendment NO. 2)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) FEBRUARY 2, 1999
(NOVEMBER 19, 1998)
CBQ, INC.
(Exact name of registrant as specified in its charter)
COLORADO 33-14707-NY 84-1047159
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
4851 KELLER SPRINGS RD., SUITE 213, DALLAS, TEXAS 75246
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (972) 732-1100
FREEDOM FUNDING, INC., 1999 BROADWAY, STE. 3235, DENVER, COLORADO 80202
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 1. CHANGE IN CONTROL OF REGISTRANT.
On November 19, 1998 (the "Closing Date"), CBQ, Inc., a Colorado
corporation formerly known as Freedom Funding, Inc. (the "Company"), consummated
an Agreement of Purchase (the "Reorganization Agreement") dated as of the
Closing Date among the Company, CyberQuest, Inc., a Colorado corporation
("CyberQuest"), and the individual stockholders of CyberQuest. The
Reorganization Agreement provided for the acquisition of all the outstanding
capital stock of CyberQuest by the Company for consideration of all the
outstanding capital stock of the Company, resulting in the complete control of
the Company by the previous stockholders of CyberQuest. On October 23, 1998,
CyberQuest was formed as a result of a Reorganization Agreement dated October
23, 1998 between CyberQuest and CyberQuest, Ltd., a Texas limited partnership.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
See Item 1, above.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired
(1) Audited consolidated financial statements of CyberQuest, Ltd.
(b) Pro Forma Financial Information.
(1) Pro Forma Consolidated Financial Statements of CBQ, Inc. at
and for the twenty-one month period ending December 31, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Company has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
CBQ, Inc.
By: /s/ MICHAEL SHERIFF
--------------------------------------
Michael Sheriff
Chief Executive Officer
Date: February 2, 1999
<PAGE>
EXHIBIT INDEX
Exhibit Description
1 Agreement of Purchase dated as of November 19, 1998 among CBQ,
Inc., a Colorado corporation formerly known as Freedom Funding,
Inc., CyberQuest, Inc., a Colorado corporation, and the
individual stockholders of CyberQuest, Inc.*
2 Series A Preferred Stock Resolutions and Provisions.*
3 Consolidated financial statements of CyberQuest, Ltd. for the
eleven month period ended December 31, 1997.
4 Consolidated financial statements of CBQ, Inc., a Texas
corporation and predecessor of CyberQuest, Ltd. for the period
from inception (April 6, 1995) to December 31, 1996.
* - previously filed.
<PAGE>
EXHIBIT 3
CYBERQUEST, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
Consolidated Financial Statements
December 31, 1997
Table of Contents
Page
--------
Independent Auditors' Report 1
Consolidated Financial Statements:
Consolidated Balance Sheets 2
Consolidated Statements of Loss 3
Consolidated Statements of Changes in Partners' Deficit 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6 - 10
<PAGE>
INDEPENDENT AUDITORS' REPORT
CyberQuest, Ltd.
Dallas, Texas
We have audited the accompanying consolidated balance sheet of CyberQuest, Ltd.
(a development stage enterprise) as of December 31, 1997, and the related
consolidated statements of loss and partners' capital, changes in partners'
capital, and cash flows for the period from inception (February 10, 1997) to
December 31, 1997. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CyberQuest, Ltd. as
of December 31, 1997, and the results of its operations and cash flows for the
period from inception (February 10, 1997) to December 31, 1997 in conformity
with generally accepted accounting principles.
/s/ Travis, Wolff & Company, L.L.P.
Dallas, Texas
January 8, 1999
<PAGE>
CYBERQUEST, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
Consolidated Balance Sheets
September 30, December 31,
1998 1997
---- ----
(Unaudited)
Assets
Current assets:
Cash $ -- $ --
Accounts receivable 10,197 36,246
--------- ---------
Total current assets 10,197 36,246
--------- ---------
Property and equipment (Note 2):
Equipment 68,676 68,676
Capitalized license fees 112,500 112,500
--------- ---------
181,176 181,176
Less accumulated depreciation
and amortization 111,535 63,735
--------- ---------
Net property and equipment 69,641 117,441
--------- ---------
Deposits and other assets 10,885 11,983
--------- ---------
Total assets $ 90,723 $ 165,670
========= =========
Liabilities and Partners' Deficit
Current liabilities:
Accounts payable $ 87,676 $ 66,514
Accrued liabilities 28,642 24,619
--------- ---------
Total current liabilities 116,318 91,133
--------- ---------
Other liabilities (Note 4) 125,572 125,572
--------- ---------
Commitments and contingencies (Notes 1, 2, 3, 4 and 5)
Partners' deficit (Note 1):
General partner (160,826) (37,810)
Limited partners (9,659) (13,225)
--------- ---------
(151,167) (51,035)
--------- ---------
Total liabilities and
partners' equity $ 90,723 $ 165,670
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
-2-
<PAGE>
CYBERQUEST, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
Consolidated Statements of Loss
Period from
Inception
Nine Months (February 10, 1997)
Ended September 30, to
---------------------- December 31,
1998 1997 1997
---- ---- ----
(Unaudited)
Revenues $ 139,010 $ 100,681 $ 136,122
--------- --------- ---------
Costs amd Expenses:
General and administrative expense 191,342 543,511 664,099
Depreciation and amortization (Note 2) 47,800 48,500 63,735
--------- --------- ---------
239,142 592,011 727,834
--------- --------- ---------
Net loss $(100,132) $(491,330) $(591,712)
========= ========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
-3-
<PAGE>
CYBERQUEST, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
Consolidated Statement of Changes in Partners' Deficit
General Limited Partners'
Partner Partners Deficit
------- -------- -------
Balance at inception, February 10, 1997 $ -- $ -- $ --
Reorganization (Note 1) -- (59,323) (59,323)
Contribution of capital by new
limited partner (Note 1) -- 600,000 600,000
Net Loss (37,810) (553,902) (591,712)
--------- --------- ---------
Balance at December 31, 1997 (37,810) (13,225) (51,035)
Net Loss (unaudited) (8,315) (121,817) (100,132)
--------- --------- ---------
Balance, September 30, 1998 (unaudited) $ (46,125) $(135,042) $(151,167)
========= ========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
-4-
<PAGE>
<TABLE>
<CAPTION>
CYBERQUEST, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
Consolidated Statements of Cash Flows
Period from
Nine Months Inception
Ended September 30, (February 10,
---------------------- 1997) to
1998 1997 December 31, 1997
---- ---- -----------------
(Unaudited)
Cash flows provided by operating activities:
<S> <C> <C> <C>
Net loss $(100,132) $(491,330) ($591,712)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 47,800 48,500 63,735
Changes in operating assets and liabilities:
Decrease (Increase) in accounts receivable (26,049) (26,296) 1,098
Decrease (Increase) in deposits and other assets (18,135) (13,746)
(Decrease) Increase in accounts payable 21,162 22,598 (11,983)
(Decrease) Increase in other liabilities -- (17,500) 44,691
(Decrease) Increase in accrued liabilities 4,023 10,297 (24,428)
--------- --------- ---------
Net cash used in operating activities -- (471,866) (508,824)
Cash flows used in investing activities:
Purchase of property and equipment -- (45,634) (68,676)
Cash flows provided by financing activities:
Proceeds from capital contribution -- 517,500 577,500
--------- --------- ---------
Net increase in cash -- -- --
Cash, beginning of period -- -- --
--------- --------- ---------
Cash, end of period $ -- $ -- $ --
========= ========= =========
Supplemental disclosure of non-cash financing activities:
Limited Partner contribution receivable $ -- $ -- 22,500
========= ========= =========
The accompanying notes are an integral part of the financial statements.
-5-
</TABLE>
<PAGE>
CYBERQUEST, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Financial Statements
(Information as of interim periods ended September 30, 1998 and 1997
is unaudited)
Note 1 - The Partnership and Going Concern Considerations
CyberQuest, Ltd., a development stage enterprise (the "Partnership"), is a Texas
limited partnership and began operation on February 10, 1997. The general
partner is CyberQuest Management Group, L.L.C. The Partnership assumed the
assets and liabilities of CBQ, Inc., (formerly CyberQuest Inc.), on February 10,
1997 in exchange for granting a 22.11 percent limited partner interest to the
CyberQuest, Inc.'s shareholders. CBQ, Inc. is now wholly-owned by the
Partnership. The transaction was recorded as reorganization accounted for in a
manner similar to a pooling of interests. During 1997, new investors contributed
a total of $600,000 cash in exchange for limited partner interests totaling 71.5
percent. The assets, liabilities and operations of CBQ, Inc. through February
10, 1997, were not significant. The net deficit of CBQ, Inc. at the date of the
reorganization is included in the Statement of Partner' Deficit as a
reorganization adjustment. The Partnership has developed an internet-based site,
Bid4it, through which buyers and sellers can trade products in an auction
format. The Bid4it site was launched in October 1997. The Partnership has no
significant revenue or operations through December 31, 1997.
The general partner owns 6.39 percent and the limited partners own 93.61
percent. The financial statements do not reflect assets the partners may have
outside their interests in the partnership, nor any personal obligations,
including income taxes, of the individual partners.
The Partnership is currently engaged in raising capital and continued
development of Bid4it. Funding of the day to day operations has been achieved
through contributions of capital from limited partner.
The Partnership's financial statements are presented on the going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The Partnership is seeking additional working
capital and equity capital to adequately fund operating losses and strategic
growth.
The Partnership's continued existence is dependent upon its ability to resolve
its liquidity problems, principally by obtaining debt financing and/or equity
capital. While pursuing additional debt and equity funding, the Partnership must
continue to operate on limited cashflow generated internally.
Working capital limitations continue to impinge on day-to-day operations, thus
contributing to operating losses. The continued support and forbearance of its
vendors and will be required, although this is not assured.
-6-
<PAGE>
CYBERQUEST, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Financial Statements
(Information as of interim periods ended September 30, 1998 and 1997
is unaudited)
Note 2 -Summary of Significant Accounting Policies
Basis of presentation
The consolidated financial statements include the accounts of the Partnership
and CBQ, Inc. All significant inter-company balances and transactions have been
eliminated.
The Partnership's balance sheet as of September 30, 1998 and the related
statements of loss, cash flow and deficit for the nine-month periods ended
September 30, 1998 and 1997 are unaudited. These unaudited financial statements
have been prepared from the books and records of the Partnership and reflect all
adjustments that are, in the opinion of management, necessary for a fair
statement of the results for the periods. All such adjustments are, in the
opinion of management, of a normal recurring nature. Operations results for the
nine-month period ended September 30, 1998 is not necessarily indicative of the
results that may be expected for the year ending December 31, 1998.
Property, equipment and depreciation
Property and equipment are carried at cost. Depreciation is computed on a
straight-line basis over the estimated useful lives of three to five years. The
carrying value of property and equipment is evaluated periodically in relation
to operating performance of the related business.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect the financial statements at, and during the reporting periods. Actual
results could differ from these estimates.
Income taxes
The Partnership does not incur income taxes for federal income tax purposes.
Instead, its earnings and losses are included in the personal returns of the
partners and taxed accordingly.
Capitalized software
Capitalized software consists of minimum amounts owed under a license agreement.
The amounts are being amortized on a straight-line basis over a period of three
years.
-7-
<PAGE>
CYBERQUEST, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Financial Statements
(Information as of interim periods ended September 30, 1998 and 1997
is unaudited)
Note 3 - Risks and Uncertainties
The Partnership's results in the development, operations and servicing of the
Bid4It operations may vary significantly given the nature of the emerging but
competitive Internet market. The success of the Partnership will depend upon a
variety of factors not within the Partnership's control, such as: Internet
growth, risk of Internet failures, competition, changes in technology, fraud,
and government regulations.
Note 4 - Commitments
CBQ, Inc. has a license agreement with Electronic Data Systems Corporation
("EDS") relating to certain proprietary software. The license agreement
terminates at the earlier of April 19, 2004 or upon the Partnership's payment to
EDS of $350,000, including amounts related to the license of certain technology
discussed below. No royalties were owed at December 31, 1997 or 1996.
Other liabilities include minimum royalties due EDS related to the license
discussed above in the development of the Bid4it web site. The amount is due in
annual installments of $50,000 in 1997 and $75,000 in 1998. The agreement was
subsequently amended to extend the payments dates to 1999 and 2000,
respectively, and extend the license agreement above to April 19, 2006.
The Partnership has an office lease commitment that requires payments of $1,792
per month through March 31, 1999.
Note 5 - Subsequent Events (unaudited)
On October 23, 1998, the Partnership entered into an to form new a corporation,
Cyberquest Inc. ("CI"). CI is a Colorado Corporation chartered on October 19,
1998. The agreement provided for the contribution of certain software technology
and $180,000 cash in exchange for 90,000 shares of common stock in CI and a
warrant for the purchase of 80,000 shares at $2.50 per share. The Partnership
agreed to contribute assets and liabilities in exchange for 10,000 shares of
common stock, 70,000 shares of preferred stock and warrants for the purchase of
40,000 shares of common stock at $2.50 per share. The warrants expire on October
23, 2003.
-8-
<PAGE>
CYBERQUEST, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Financial Statements
(Information as of interim periods ended September 30, 1998 and 1997
is unaudited)
Note 5 - Subsequent Events (unaudited) - (Continued)
The preferred stock issued is redeemable at the option of CI as follows:
o 7000 shares at the greater of $10.00 per share or the traded market value of
the preferred stock on or before October 23,1999
o 14,000 shares at the greater of $10.715 per share or the traded market value
of the preferred stock on or before October 23,2000
o 21,000 shares at the greater of $11.905 per share or the traded market value
of the preferred stock on or before October 23,2001
o 28,000 shares at the greater of $12.50 per share or the traded market value
of the preferred stock on or before October 23, 2002
Any preferred stock not redeemed by the CI may at the Company's option be
converted to common stock of CI on the basis of four shares of common stock for
one share of preferred stock converted. CI also granted an incentive option to
acquire 25,000 shares of common stock at $.10 per share if a merger with a
publicly traded entity on a national stock exchange is completed with ninety
days of the CI/Company merger.
On November 19, 1998, CI was acquired by Freedom Funding, Inc. ("Freedom"), a
public shell listed on the Over-the-Counter bulletin board, in a reverse
acquisition accounted for as a recapitalization. CI is the "accounting"
acquirer. Freedom had no assets as of September 30, 1998 or operations for the
nine-month period ended September 30, 1998. Subsequently, Freedom changed its
name to CBQ, Inc. The CI stockholders received 18,000,000 shares of common stock
(par value $.0001 per share) and 70, 000 shares of Series A preferred stock (par
value $10.00 per share). The call provisions of the Series A preferred stock are
the same as the CI preferred stock except the call prices range from $10.00 to
$13.00 and there is no conversion feature.
-9-
<PAGE>
CYBERQUEST, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Financial Statements
(Information as of interim periods ended September 30, 1998 and 1997
is unaudited)
Note 5 - Subsequent Events (unaudited)- (Continued)
The following is the unaudited pro forma Stockholders' equity as if the
reorganization of CI and the merger with Freedom Funding, Inc. had occurred on
September 30, 1998:
<TABLE>
<CAPTION>
Preferred Stock Common Stock
---------------------- -------------------------
Accumulated Partners'
Shares Values Shares Values Deficit Deficit Total
------ ------ ------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
CyberQuest, Ltd. at
September 30, 1998 -- $ -- -- $ -- $ -- $ (151,167) $ (151,167)
Reorganization into CI 70,000 700,000 100,000 180,000 (851,167) 151,167 180,000
-------- ----------- ----------- ----------- ----------- ----------- -----------
70,000 700,000 100,000 180,000 (851,167) -- 28,833
Merger with Freedom
Funding Inc on
November 19, 1998 -- -- 19,975,325 (177,992) 177,992 -- --
-------- ----------- ----------- ----------- ----------- ----------- -----------
70,000 $ 700,000 20,075,325 $2008 $ (673,175) $ -- $ 28,833
======== =========== =========== =========== =========== =========== ===========
</TABLE>
-10-
<PAGE>
EXHIBIT 4
CBQ, INC.
(FORMERLY CYBERQUEST, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
Financial Statements
December 31, 1996
Table of Contents
Page
------
Independent Auditors' Report 1
Financial Statements:
Balance Sheet 2
Statement of Loss 3
Statement of Stockholders' Deficit 4
Statement of Cash Flows 5
Notes to Financial Statements 6 - 8
<PAGE>
INDEPENDENT AUDITORS' REPORT
CBQ, Inc.
Dallas, Texas
We have audited the accompanying balance sheet of CBQ, Inc. (formerly
CyberQuest, Inc.) (a development stage enterprise) as of December 31, 1996, and
the related statement of loss, stockholders' deficit, and cash flows for the
period from inception (April 6, 1995) to December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CBQ, Inc. as of December 31,
1996, and the results of its operations and cash flows for the period from
inception (April 6, 1995) to December 31, 1996 in conformity with generally
accepted accounting principles.
/s/ Travis Wolff & Company, L.L.P.
Dallas, Texas
January 8, 1999
<PAGE>
CBQ, INC.
(FORMERLY CYBERQUEST, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
Balance Sheet
December 31, 1996
Assets
Current assets:
Cash $ 3,208
Accounts receivable 3,270
---------
6,478
Capitalized license fees, net of $37,500
accumulated depreciation (Note 1 and 3) 112,500
Deposits and other assets 16,953
---------
Total assets $ 135,931
=========
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable ($18,282 to affiliate) $ 19,479
Accrued liabilities 6,000
---------
25,479
Other liabilities (Note 3) 153,481
---------
Total liabilities 178,960
---------
Commitments and contingencies (Notes 1 and 3)
Stockholders' Deficit:
Common stock; 10,000,000 shares authorized; 3,076,333
issued and outstanding; par value of $.01 per share 30,763
Accumulated Deficit (73,792)
---------
(43,029)
---------
Total liabilities and stockholders' deficit $ 135,931
=========
The accompanying notes are an integral part of the financial statements.
-2-
<PAGE>
CBQ, INC.
(FORMERLY CYBERQUEST, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
Statement of Loss
For the Period From Inception (April 6, 1995) to December 31, 1996
Revenues $ 53,344
---------
Costs and Expenses:
General and administrative (Note 2) 89,636
Amortization expenses 37,500
---------
127,136
---------
Net loss $ (73,792)
=========
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE>
CBQ, INC.
(FORMERLY CYBERQUEST, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
Statement of Stockholders' Deficit For the Period from
Inception (April 6, 1995) to December 31, 1996
Common Stock
---------------------
Shares Amount
Accumulated deficit
Balance, at inception (April 6, 1995) -- $ -- $ --
Issuance of common stock to
founders for organization costs and
acquisition of certain technology
(Note 2) 3,076,333 30,763 --
Net loss -- -- (73,792)
--------- --------- ---------
Balance, December 31, 1996 3,076,333 $ 30,763 $ (73,792)
========= ========= =========
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE>
CBQ, INC.
(FORMERLY CYBERQUEST, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
Statement of Cash Flows
For the Period From Inception (April 6, 1995) to December 31, 1996
Cash flows provided by operating activities:
Net loss $ (73,792)
Adjustments to reconcile net loss
to net cash provided by (used in) operating activities:
Depreciation and amortization 37,500
Changes in operating assets and liabilities:
Increase in accounts receivable (3,270)
Decrease in deposits and other assets 13,810
Increase in accounts payable 19,479
Increase in accrued liabilities 6,000
Increase in other liabilities 3,481
Net cash provided by operating activities 3,208
---------
Net change in cash 3,208
Cash, beginning of period --
---------
Cash, end of period $ 3,208
=========
Supplemental disclosure of non-cash investing/financing activities:
Capitalized license fees payable $ 150,000
Issuance of 3,076,333 shares of common stock for
services rendered and technology $ 30,763
=========
The accompanying notes are an integral part of the financial statements.
-5-
<PAGE>
CBQ, INC.
(FORMERLY CYBERQUEST, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Financial Statements
December 31, 1996
Note 1 - The Company and Summary of Significant Accounting Policies
The Company
CBQ, Inc., a development stage enterprise (the "Company"), was incorporated
under the laws of the State of Texas on April 6, 1995, and began operation in
January 1996. The Company has no significant revenue or operations through
December 31, 1996. The Company is developing an internet-based site, Bid4it.
Through this site, buyers and sellers can trade products in an auction format.
Cash and cash equivalents
Cash and cash equivalents are defined as cash and investments that have a
maturity of less than three months.
Property, equipment and depreciation
Property and equipment are carried at cost. Depreciation is computed on a
straight-line basis over the estimated useful life of three years. The carrying
value of property and equipment is evaluated periodically in relation to
operating performance of the related business.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect the financial statements at, and during the reporting periods. Actual
results could differ from these estimates.
Income taxes
The Company has a net operating loss for income taxes. Due to the regulatory
limitations in utilizing the loss, it is uncertain whether the Company will be
able to realize a benefit from these losses. Therefore, a deferred tax asset has
not been recorded. There are no significant tax differences requiring deferral.
-6-
<PAGE>
CBQ, INC.
(FORMERLY CYBERQUEST, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Financial Statements
December 31, 1996
Note 1 - The Company and Summary of Significant Accounting Policies -
(Continued)
Capitalized software
Capitalized software consists of minimum amounts owed under a license agreement.
The amounts are being amortized on a straight-line basis over a period of three
years.
Note 2 - Common Stock and Related Party Transactions
The Company acquired an Internet site, GoodStuffCheap from an entity
Commonwealth Trading Company, wholly owned by a Company's shareholder in
exchange for 214,667 shares of common stock. The Company also issued 150,000
shares for certain services and expenses incurred. The shares were recorded at
par value with a charge to general and administrative expense. The site is
designed to and has operated as an e-commerce site for buyers and sellers of
less-costly items. The site is functional but not currently operating due to
management's focus on developing Bid4it. Management intends to utilize this site
as a secondary trade site relative to Bid4it.
The Company's shareholders completed activities necessary to form the entity and
operations. In lieu of wages, the shareholders received 2,500,000 shares of
common stock. The shares were recorded at par value with a charge to general and
administrative expense.
Note 3 - Commitments
On April 19, 1996, the Company entered into an agreement with Electronic Data
System Corporation ("EDS") to license certain proprietary software. The license
agreement terminates at the earlier of April 19, 2004 or upon the Company's
payment to EDS of $350,000, including amounts related to the license of certain
technology discussed below. No royalties were owed at December 31, 1996.
Other liabilities include an amount due Electronic Data System Corporation
related to the license of certain technology used in the development of the
Bid4it web site. The amount is due in annual installments of $50,000 in 1997 and
$75,000 in 1998. The agreement was subsequently amended to extend the payments
dates to 1999 and 2000, respectively and to extend the termination date of the
license agreement to April 2006.
-7-
<PAGE>
CBQ, INC.
(FORMERLY CYBERQUEST, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Financial Statements
December 31, 1996
Note 4 - Risks and Uncertainties
The Company's results in the development, operations and servicing of the Bid4it
operations may vary significantly given the nature of the emerging but
competitive Internet market. The success of the Company will depend upon a
variety of factors not within the Company's control, such as: internet growth,
risk of internet failures, competition, changes in technology, fraud, and
government regulations.
Note 5 - Reorganization
In February 1997, the shareholders of the Company exchanged their investment in
common stock of the Company for limited partnership interests in CyberQuest,
Ltd. CyberQuest, Ltd. assumed the assets and liabilities of the Company.
-8-
Exhibit 2.f. Periodic report on Form 8KSB dated February 2, 1999, amending Form
8KSB dated November 19, 1998 (Amendment No. 1)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) FEBRUARY 2, 1999
(NOVEMBER 19, 1998)
CBQ, INC.
(Exact name of registrant as specified in its charter)
COLORADO 33-14707-NY 84-1047159
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
4851 KELLER SPRINGS RD., SUITE 213, DALLAS, TEXAS 75246
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (972) 732-1100
FREEDOM FUNDING, INC., 1999 BROADWAY, STE. 3235, DENVER, COLORADO 80202
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 1. CHANGE IN CONTROL OF REGISTRANT.
On November 19, 1998 (the "Closing Date"), CBQ, Inc., a Colorado
corporation formerly known as Freedom Funding, Inc. (the "Company"), consummated
an Agreement of Purchase (the "Reorganization Agreement") dated as of the
Closing Date among the Company, CyberQuest, Inc., a Colorado corporation
("CyberQuest"), and the individual stockholders of CyberQuest. The
Reorganization Agreement provided for the acquisition of all the outstanding
capital stock of CyberQuest by the Company for consideration of all the
outstanding capital stock of the Company, resulting in the complete control of
the Company by the previous stockholders of CyberQuest. On October 23, 1998,
CyberQuest was formed as a result of a Reorganization Agreement dated October
23, 1998 between CyberQuest and CyberQuest, Ltd., a Texas limited partnership.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
See Item 1, above.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired
(1) Consolidated financial statements of CyberQuest, Ltd. for the
period from inception (February 10, 1997) to December 31, 1997.
(2) Consolidated financial statements of CBQ, Inc., a Texas corporation
and the predecessor to CyberQuest, Ltd. for the period from
inception (April 6, 1995) to December 31, 1996.
(b) Pro Forma Financial Information
Prior to the consummation of the Reorganization Agreement, the
Company had no material operations, assets or liabilities.
Reference is made to the information provided in the consolidated
financial statements regarding CyberQuest, Ltd. and CBQ, Inc. filed
with this Current Report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Company has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
CBQ, Inc.
By: /s/ MICHAEL SHERIFF
--------------------------------------
Michael Sheriff
Chief Executive Officer
Date: February 5, 1999
<PAGE>
EXHIBIT INDEX
Exhibit Description
1 Agreement of Purchase dated as of November 19, 1998 among
CBQ, Inc., a Colorado corporation formerly known as Freedom
Funding, Inc., CyberQuest, Inc., a Colorado corporation, and
the individual stockholders of CyberQuest, Inc.*
2 Series A Preferred Stock Resolutions and Provisions.*
3 Consolidated financial statements of CyberQuest, Ltd. for
the eleven month period ended December 31, 1997.*
4 Consolidated financial statements of CBQ, Inc., a Texas
corporation and predecessor of CyberQuest, Ltd. for the
period from inception (April 6, 1995) to December 31, 1996.*
* - previously filed.
Exhibit 2.g. Periodic report on Form 8KSB dated January 6, 2000
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8 KSB
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
December 22, 1999
-----------------
(Date of Report)
CBQ, Inc.
---------
(Exact name of registrant as specified in its charter)
Colorado
--------
(State or other jurisdiction of incorporation)
33-14707-NY 84-1047159
----------- ----------
(Commission File Number) (IRS Employer Identification Number)
4851 Keller Springs Rd., Ste. 228, Dallas, Texas 75248
------------------------------------------------------
(Address of principal executive offices including zip code)
(972) 732-1100
--------------
(Registrant's telephone number including area code)
Not Applicable
-----------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 1. Change in Control of Registrant: See Item 5, below.
Item 2. Acquisition or Disposition of Assets: See Item 5, below.
Item 3. Bankruptcy or Receivership: Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant: Not Applicable.
Item 5. Other Events: Acquisition of CyberQuest, Inc.
Reorganization Agreement: On December 22, 1999, CBQ, Inc., a Colorado
corporation (CBQI or the Company), entered into a reorganization agreement
(Reorganization Agreement) with ChinaSoft, Inc., District of Columbia
corporation (ChinaSoft), and the shareholders of ChinaSoft. The Reorganization
Agreement resulted in the Company agreeing to acquire all of the outstanding
stock of ChinaSoft in a stock-for-stock exchange. Consummation of the
acquisition is subject to a due diligence period discussed immediately below. If
the acquisition is consummated, ChinaSoft will become a wholly-owned subsidiary
of the Company and the shareholders of ChinaSoft will acquire a controlling
interest in the Company. The reorganization has been structured as a tax-free
triangular merger.
The closing of the acquisition of ChinaSoft has been scheduled to take place at
the offices of Porter, Wright, Morris & Arthur at 1667 K Street NW, Suite 1100,
Washington, D.C. Closing will occur on the conclusion of certain due diligence
by both parties. This due diligence must be completed by the close of business
on January 14, 2000. The Reorganization Agreement provides that the Company and
ChinaSoft each may conduct whatever due diligence they feel necessary to verify
the truth and accuracy of the various representations and warranties made to one
another in the Reorganization Agreement. Either party has the right to rescind
the Reorganization Agreement in case of a material breach.
The Reorganization Agreement does not require a change of either the name or the
outstanding capitalization of the Company.
The Company, under the Reorganization Agreement, will issue and deliver at
closing approximately thirty million shares of its restricted common stock to
the shareholders of ChinaSoft on a pro rata basis. The shares issued will
constitute no less than 51% of the outstanding proprietary interest of CBQI on a
fully diluted basis immediately after their issuance and delivery. The CBQI
Shares will have been fully paid for and will be non assessable and restricted,
as defined in Regulation D and Rule 144 of the Securities Act of 1933, as
amended.
<PAGE>
Concurrent with the execution and deliver of the Reorganization Agreement, Mr.
William J. Flannery and Ms. Barbara Reihl resigned as directors, leaving Messrs.
John Harris, Greg Allen and Richard Schwartz as the sole remaining directors.
The executive officers of the Company remained unchanged. If closing occurs,
four additional directors will be appointed. These will be Mr. Bart S. Fisher
(who shall also act as Chairman), Mr. J. Patrick Dowd, Ms. Song Zhi De, and Mr.
Chang Guomin. The current executive officers of the Company will remain
unchanged immediately subsequent to closing. The directors of ChinaSoft,
immediately subsequent to closing, will be Bart S. Fisher (who shall also act as
Chairman), Song Zhi De and Xu Ying.
Overview of ChinaSoft:
Founding and Business Summary: ChinaSoft was incorporated to promote the
export of Chinese software services and solutions to the U.S. market. Eventually
ChinaSoft will spin out and be its own entity, at which time it will make an
initial public stock offering on the U.S. and Hong Kong exchanges. Recently,
ChinaSoft and Beijing Zhongruan Zhixun Technology Development Co., Ltd., the
marketing affiliate of the China National Software & Service Technologies
Company (CS&S, an arm of the Chinese government), entered into a joint venture.
Strategic Management Team: Bart S. Fisher, Chairman of the Board. Mr.
Fisher is Counsel with the law firm of Porter, Wright, Morris & Arthur in
Washington, DC. From 1972 through April, 1994, he practiced law with Patton,
Boggs in Washington, DC, where he was a partner as of January 1, 1978. While at
Patton Boggs he was on the Management Committee and Chair of the International
Trade Practice Group. From May, 1994, until August 1, 1995, he was a partner
with the law firm Arent Fox Kintner Plotkin & Kahn in Washington, DC.
He attended Harvard Law School (JD 1972), The Johns Hopkins School of Advanced
International Studies in Washington, DC, and Bologna, Italy (MA 1967 and PhD
1970) and Washington University (BA 1963). He was elected to Phi Beta Kappa at
Washington University, and awarded the Brookings Institution Fellowship in 1968.
Dr. Fisher is an Adjunct Professor in International Relations at the Georgetown
University School of Foreign Service, and has been a Professorial Lecturer in
International Relations at The Johns Hopkins School of Advanced International
Studies, and Senior Lecturer in International Transactions at the International
Institute of George Mason University. He was a Fellow in the Foreign Policy
Studies Division at the Brookings Institute (1968 to 1969).
He is a member of the International Bar Association and an ex-officio member of
the Board of Governors, International Practice Section, Virginia State Bar. He
serves on the Program Committee of Georgetown University Leadership Seminar,
which he co-founded in 1981, as a Director of The Institute at Mars Hill
College, as a participating member of the International Trade Working Group of
the President's Council on Year 2000 Conversion, and is a nationally syndicated
columnist for NewsUSA.
<PAGE>
He is Managing Partner of Capital House Merchant Banking, LLC, and President of
Capital Baseball, Inc. From 1991-1994 he was Vice President of the Prince
William Cannons Professional Baseball Club and a member of its Board of
Directors. He formerly served as a Director of Total Health, a New York-based
health maintenance organization.
He is a member of the Board of Directors of the National Marrow Donor Program,
The Marrow Foundation, and the Aplastic Anemia Foundation (which he founded in
1983), and has served as President of the Aplastic Anemia Foundation. He is a
member of the American Legion Parkville Post.
Dr. Fisher is listed in Who's Who in the World, Who's Who in American Law, and
Who's Who in America.
The biographies for Mr. J. Patrick Dowd, Ms. Song Zhi De, and Mr. Chang Guomin
are currently being prepared.
Market Analysis: The U.S. market for software is very large, as is the
market for software in China. ChinaSoft will seek to provide software solutions
for both the U.S. and China markets. ChinaSoft will focus initially on
applications in the telecommunications area.
Market Opportunity: ChinaSoft intends to benefit from its relationships in
China in both an export and import capacity. Along with the exportation of
Chinese software services and solutions, ChinaSoft wants to help U.S. companies
engaging in joint ventures in China with software projects in China. ChinaSoft
will compete with India's market for offshore engineering solutions. China has a
competitive advantage in the labor market for software engineers. A college
graduate in China earns just $3,000 a year as a programmer compared to the over
$60,000 per year earned by U.S. graduates.
ChinaSoft plans to export Chinese software services and solutions over the
Internet. In this manner, U.S. companies can easily access Chinese engineers for
projects. The time difference between the United States and China will be a
beneficial factor in this regard. Chinese engineers can work on projects while
U.S. customers are asleep and, in some cases, have it delivered by morning.
Target Market: The target market will consist of two types of customers:
(1) people who want to do IT work in China who currently go to India, and (2)
direct customers that have a shortage of IT people. Prospective customers
include KPMG, Motorola, and CyberCash.
<PAGE>
Market Size: China is a market with 1.3 billion people, with per capita
incomes varying substantially depending on the part of the country surveyed.
Initially, ChianSoft will focus on the coastal provinces including Beijing,
Shanghai, Shandong, and Fujian. The per capita income in the coastal areas of
China is around $1,000 per person. It is on the order of $300 per capita for the
inland provinces, which will be a later target of opportunity.
Business Strategy: ChinaSoft plans to pursue its business in China on three
different levels. First and foremost, ChinaSoft will promote the exportation of
Chinese software services and solutions. Second, ChinaSoft hopes to become an
Internet Service Provider (ISP) in China. Currently, there are only a few ISPs,
including the Government of China. There is no foreign investment in the Chinese
Internet except for the WTO. ChinaSoft may invest up to 50 percent in a Chinese
Internet company. ChinaSoft believes that it can compete in the area of
e-payments. Finally, ChinaSoft hopes to compete in the telecommunications
industry in China by entering into wireless web market.
ChinaSoft also plans to sell software and software solutions on the Internet
through ChinaSoftInternational.com.
Strategic Relationships: ChinaSoft's key strategic relationship is its
joint venture with China National Computer Software & Technology Service
Corporation/Beijing Zhongruan Zhixun Technology Development Co., Ltd., which is
a marketing arm of China National Compurter Software & Technology Service
Corporation ("CS&S"). The Chairman of the Board of Beijing Zhongruan Zhixun
Technology Development Co., Ltd. is Chang Guomin, who has very good
relationships with the Government of China and the business community within
China.
Intellectual Property: The key intellectual property possessed by ChinaSoft
is know-how related to computer programming.
Item 6. Resignation of Registrant's Directors: Not Applicable.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits: Not
Applicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CBQ, Inc.
(Registrant)
By: /s/ John Harris
------------------------------------
John Harris, Chief Executive Officer
Date: January 6, 1999
<PAGE>
EXHIBIT
Exhibit 1. Reorganization Agreement
EXHIBIT No. 1
REORGANIZATION AGREEMENT
CHINASOFT, INC.
(a District of Columbia corporation)
with
CBQ, INC.
(a Colorado corporation)
and
TRI BEAU ACQUISITION COMPANY
(a District of Columbia corporation)
December 22, 1999
THIS REORGANIZATION AGREEMENT (Agreement), has been entered into this 22nd day
of December, 1999, and is between ChinaSoft, Inc. (ChinaSoft), a privately held
District of Columbia corporation, CBQ, Inc. (CBQI), a publicly held Colorado
corporation, and Tri Beau Acquisition Company (Acquiring Corporation), a
District of Columbia corporation wholly owned by CBQI which was formed solely
for the purpose of acquiring ChinaSoft as a wholly owned subsidiary of CBQI in a
tax free A Reorganization using a Reverse Triangular Merger (Merger).
THE FOLLOWING PREMISES ARE AN INTEGRAL PART OF THIS AGREEMENT: CBQI intends to
acquire (through the Merger) ChinaSoft as a wholly owned subsidiary, and
ChinaSoft intends to be acquired by CBQI in this manner. Acquiring Corporation
was formed as a wholly owned subsidiary of CBQI solely for the purpose of
acquiring ChinaSoft as a wholly owned subsidiary of CBQI in a tax exempt
reorganization. The respective board of directors of ChinaSoft, CBQI and
Acquiring Corporation have found it advisable for the benefit of each
corporation that CBQI acquire through the Merger ChinaSoft as a wholly owned
subsidiary and have each approved this Agreement. The board of directors of
ChinaSoft and Acquiring Corporation have recommended and submitted the Merger to
the shareholders of their respective corporations for approval. The shareholders
of ChinaSoft and Acquiring Corporation have duly approved the Merger.
In consideration of the foregoing premises and the mutual terms,
representations, warranties, covenants and conditions set forth subsequently in
this Agreement, and such other and further consideration, the receipt and
sufficiency of each which are hereby acknowledged,
THE PARTIES HEREBY ADOPT THIS AGREEMENT AS A TAX FREE REORGANIZATION UNDER
SECTION 368(a) OF THE INTERNAL REVENUE CODE AS FOLLOWS:
<PAGE>
ARTICLE I: Merger
1.01. Closing. The closing of the transactions evidenced by this Agreement
(Closing) will take place at the offices of Porter, Wright, Morris & Arthur at
1667 K Street NW, Suite 1100, Washington, D.C., upon the occurrence of certain
conditions subsequent as set forth in Section 5.12 of this Agreement on or
before January 14, 2000 (the Closing Date).
1.02. Surviving Corporation. Acquiring Corporation shall be merged into
ChinaSoft, which shall be, and will be sometimes referred to in this Agreement,
as the Surviving Corporation. The Merger shall become effective on the filing
date of the Certificates and Articles of Merger with the appropriate Secretaries
of State and/or equivalent organization in the District of Columbia. (a)
Articles of Incorporation. The articles of incorporation of ChinaSoft, as
heretofore amended and as in effect immediately prior to Closing, shall be the
articles of the Surviving Corporation. (b) Bylaws. The bylaws of ChinaSoft, as
heretofore amended and as in effect immediately prior to Closing, shall be the
bylaws of the Surviving Corporation. (c) Directors. The directors of CBQI,
immediately subsequent to Closing, shall be Bart S. Fisher (who shall also act
as Chairman of the Board), J. Patrick Dowd, Song Zhi De, Chang Guomin, John
Harris, Greg Allen and Richard Schwartz. The directors of the Surviving
Corporation, immediately subsequent to Closing, shall be Bart S. Fisher (who
shall also act as Chairman of the Board), and Song Zhi De and Xu Ying. These
directors shall hold office until their respective successors are duly elected
or appointed and qualified in the manner provided in the articles and bylaws
governing the Surviving Corporation. Nothing contained in this paragraph shall
be construed to create any employment or other contractual rights in the
aforesaid directors with the Surviving Corporation, except that such directors
shall be entitled to participate in any incentive stock option plan which may be
subsequently adopted by CBQI. (d) Executive Officers. The executive officers of
CBQI and ChinaSoft, immediately subsequent to Closing, shall be appointed by the
board of directors of the respective corporations.
1.03. Terms of the Merger. On Closing and with the effectiveness of the Merger,
each share of stock then issued and outstanding by Acquiring Corporation and
ChinaSoft shall, by virtue of the Merger and without any action on the part of
the holder(s) of the shares (with the exception of one (1) share of ChinaSoft,
which shall be owned and held by CBQI) shall no longer be outstanding and shall
be canceled and retired and cease to exist, and the shares of ChinaSoft shall be
converted into the right to receive, on surrender of the certificate
representing such shares, the consideration set forth under Section 1.04 of this
Agreement.
1.04. Payment for Shares. In consideration for the Merger, CBQI shall issue and
deliver approximately thirty million (30,000,000) shares of its restricted
common stock (the CBQI Shares) to the shareholders of ChinaSoft on a pro rata
basis. The CBQI Shares shall constitute no less than 51% of the outstanding
proprietary interest of CBQI on a fully diluted basis immediately after their
issuance and delivery. The CBQI Shares shall be fully paid, non assessable, and
restricted, as defined in Regulation D and Rule 144 under the Securities Act of
1933, as amended (the Securities Act).
<PAGE>
1.05. Certain Effects of the Merger. On Closing, the separate existence of
Acquiring Corporation shall cease, and Acquiring Corporation shall be merged
with and into ChinaSoft, which, as the Surviving Corporation, shall possess all
the assets, properties, rights, privileges, powers and franchises of a public or
of a private nature, and be subject to all liabilities, restrictions,
disabilities and duties of Acquiring Corporation. If at any time the Surviving
Corporation shall consider or be advised that any further assignment or
assurances in law or any things are necessary or desirable to vest in the
Surviving Corporation, according to the terms hereof, the title to any property
or rights of Acquiring Corporation, the last acting officers and directors of
Acquiring Corporation (or the corresponding officers and directors of the
Surviving Corporation) shall execute and make all such proper assignments and
assurances and do all things necessary or proper to vest title in such property
or rights in the Surviving Corporation, and otherwise to carry out the purpose
and intent of this Agreement.
1.06. Filing of Certificate of Merger. As soon as practicable after the
effectiveness of Closing, Acquiring Corporation shall deliver for filing duly
executed Articles of Merger as required by the District of Columbia Corporations
Code, and will take such other and further action in connection therewith as may
be required by District of Columbia law to make the Merger effective as soon as
practicable thereafter. ChinaSoft shall deliver for filing duly executed
Articles of Merger as required by the District of Columbia Corporations Code,
and will take such other and further action in connection therewith as may be
required by District of Columbia law to make the Merger effective as soon as
practicable thereafter.
ARTICLE II: Representations and Warranties of ChinaSoft to CBQI and Acquiring
Corporation
ChinaSoft hereby represents and warrants to CBQI and Acquiring Corporation,
jointly and severally, that, as of the execution date of this Agreement and also
as of Closing:
2.01. Authority: All necessary action has been taken to make this Agreement a
legal, valid and binding obligation of ChinaSoft enforceable in accordance with
its terms and conditions.
<PAGE>
2.02. No Breach or Violation: The execution and delivery of this Agreement and
the performance by ChinaSoft of its obligations will not result in any breach or
violation of or default under any material agreement, indenture, lease, license,
mortgage, instrument, or understanding, nor result in any violation of any law,
rule, regulation, statute, order or decree of any kind, to which ChinaSoft
and/or any of its affiliates is a party or by which they or any of them or any
of their property is or may be or may become subject, nor in the violation of
any documents governing the conduct of ChinaSoft.
2.03. Nonassessable ChinaSoft Shares: The outstanding ChinaSoft proprietary
shares have each been validly issued and are fully paid for and nonassessable.
2.04. No Liens on ChinaSoft Shares: The outstanding ChinaSoft proprietary shares
are not and shall not be or shall not become subject to any lien, encumbrance,
security interest or financing statement whatsoever through any act of ChinaSoft
and/or its shareholders; further, the outstanding ChinaSoft proprietary shares
are not the subject of any agreement.
2.05. Capital Percentage; Outstanding Commitments: The outstanding ChinaSoft
proprietary shares represent 100% of the outstanding proprietary interest of
ChinaSoft; further, there are no outstanding commitments (direct or indirect)
which would cause the issuance or transfer out of treasury of any additional
proprietary interest of ChinaSoft, whether by common stock, preferred stock,
option, warrant, debt or otherwise.
2.06. Audited Financial Statements and Tax Reports. Chinasoft was formed on
September 8, 1999 for the primary purpose of providing a joint venture mechanism
to develop telephony, software development and internet service businesses to
and from the People's Republic of China. As such, Chinasoft and, thereby, CBQI,
subsequent to Closing are not required to provide audited or unaudited financial
statements in accordance with Form 8 KSB or Regulation S X as incorporated
thereby in regards of the Merger.
2.07. No Undisclosed Liabilities or Obligations. ChinaSoft has no obligations or
liabilities of any nature (absolute, accrued, contingent or otherwise, and
whether due or to become due, herein liabilities).
<PAGE>
2.08. Litigation. There is no legal, administrative, arbitration or other
proceeding, claim or action of any nature or investigation pending or threatened
against ChinaSoft, or which questions or challenges the validity of this
Agreement or any action to be taken by ChinaSoft pursuant to this Agreement or
in connection with the transactions contemplated hereby, and ChinaSoft does not
know or have any reason to know of any valid basis for any such legal,
administrative, arbitration or other proceeding, claim or action of any nature
or investigation. ChinaSoft is not subject to any judgment, order or decree
entered in any lawsuit or proceeding which has an adverse effect on their
business practices or on their ability to acquire any property or conduct their
business in any area.
2.09. Compliance with Law. ChinaSoft is in compliance with all laws, regulations
and orders applicable to its business and ChinaSoft has not received any
notification that they are in violation of any law, regulation or order and no
such violation exists.
2.10. Disclosure. No representations or warranties made by ChinaSoft contain any
untrue statement of fact or omit to state any fact necessary in order to make
the statements herein or therein, in light of the circumstances under which they
were made, not misleading; further, there are no facts known to ChinaSoft which
(either individually or in the aggregate) could or would materially and
adversely affect or involve any substantial possibility of having a material,
adverse effect on the condition (financial or otherwise), results of operations,
assets, liabilities or businesses of ChinaSoft which have not been disclosed in
this Agreement.
2.11 No Material Liabilities. ChinaSoft owns and holds 25% of all authorized,
issued and outstanding shares of common stock of Capital Software, Inc., a
District of Columbia corporation. Except as provided in this Section 2.11,
neither ChinaSoft nor Capital Software, Inc. have any material liabilities of
any kind.
ARTICLE III: Understandings of ChinaSoft and its Shareholders
ChinaSoft acknowledges, understands and agrees that:
3.01. Certificate. The certificate representing the CBQI Shares will bear a
legend restricting their transfer under Rule 144 of the Securities Act of 1933.
3.02. No Securities Act Registration. The CBQI Shares have not been registered
under the Securities Act of 1933 or any applicable state law (collectively, the
Securities Act). The CBQI Shares may not be sold, offered for sale, transferred,
pledged, hypothecated or otherwise disposed of except in compliance with the
Securities Act. The ChinaSoft shareholders must bear the economic risk of their
investment in the CBQI Shares for an indefinite period of time. If they desire
to sell or transfer all or any part of the CBQI Shares within the restricted
period, CBQI may require their counsel to provide a legal opinion that the
transfer may be made without registration under the Securities Act.
<PAGE>
3.03. Lack of Agency Findings. No federal or state agency has made any findings
or determination as to the fairness of an investment in CBQI or any
recommendation or endorsement of this investment.
3.04. Limited Market for CBQI Shares. There is presently only a limited market
for the CBQI Shares and no market may exist in the future for any sale or sales
of all or any portion thereof.
3.05. Commitments to Investments. The commitment of the ChinaSoft shareholders
to investments that are not readily marketable is not disproportionate to their
net worth and their investment in the CBQI shares will not cause their
commitments to become excessive.
3.06. Financial Ability. The ChinaSoft shareholders have the financial ability
to bear the economic risks of this investment, have adequate means of providing
for their current needs, and have no need for liquidity in this investment.
3.07. High Risk of Investment. The ChinaSoft shareholders have evaluated the
high risks of investing in the CBQI Shares and have such knowledge and
experience in financial and business matters in general and in particular with
respect to this type of investment that they are capable of evaluating the
merits and risks of an investment in the CBQI Shares.
3.08. Opportunity to Investigate Investment. The ChinaSoft shareholders have
been given the opportunity to ask questions of and receive answers from CBQI
concerning the terms and conditions of this investment and to obtain additional
information necessary to verify the accuracy of the information it desired in
order to evaluate his investment. In evaluating the suitability of an investment
in the CBQI Shares, they have not relied on any representations or other
information (whether oral or written) other than that furnished to them by CBQI
or the representatives of CBQI.
3.09. Opportunity to Consult Professionals. The ChinaSoft shareholders have had
the opportunity to discuss with their professional, legal, tax and financial
advisers the suitability of an investment in the CBQI Shares for their
particular tax and financial situation and all information that they have
provided to CBQI concerning themselves and their financial position is correct
and complete.
<PAGE>
3.10. Reliance. In making the decision to purchase the CBQI Shares, the
ChinaSoft shareholders have relied solely upon independent investigations made
by them or on their behalf.
3.11. Investment Purpose. The ChinaSoft shareholders are acquiring the CBQI
Shares solely for their own account, for investment purposes only, and are not
purchasing with a view to, or for, the resale, distribution, subdivision or
fractionalization thereof.
ARTICLE IV: Representations and Warranties of CBQI and Acquiring Corporation to
ChinaSoft
CBQI and Acquiring Corporation hereby represent and warrant to ChinaSoft that,
as of the date of the execution of this Agreement and as of Closing:
4.01. Authority: All necessary action has been taken to make this Agreement a
legal, valid and binding obligation of CBQI enforceable in accordance with its
terms and conditions.
4.02. No Breach or Violation: The execution and delivery of this Agreement and
the performance by CBQI of its obligations will not result in any breach or
violation of or default under any agreement, indenture, lease, license,
mortgage, instrument, or understanding, nor result in any violation of any law,
rule, regulation, statute, order or decree of any kind, to which CBQI or any of
its affiliates is a party or by which they or any of their property is or may be
or may become subject, nor in the violation of the articles or bylaws governing
the conduct of CBQI.
4.03. Nonassessable CBQI Shares: The CBQI Shares have each been validly issued
and are fully paid for and nonassessable.
4.04. No Liens on CBQI Shares: The CBQI Shares are not and shall not be or
become subject to any lien, encumbrance, security interest or financing
statement whatsoever through any act of CBQI or its affiliates; further, the
CBQI Shares are not the subject of any agreement other than this Agreement.
4.05. Capital Percentage; Outstanding Commitments: The CBQI Shares represent no
less than 51% of the outstanding proprietary interest of CBQI on a fully diluted
basis; further, there are no outstanding commitments (direct or indirect) which
would cause the issuance or transfer out of treasury of any additional
proprietary interest of CBQI, whether by common stock, preferred stock, option,
warrant, debt or otherwise, other than pursuant to those contracts which have
been disclosed to ChinaSoft and which it has acknowledged receipt of.
<PAGE>
4.06. SEC and Tax Reports; Filings: CBQI has delivered to ChinaSoft its annual
report on Form 10 KSB for the year ended December 31, 1998, and its quarterly
reports on Form 10 QSB for the fiscal quarters ended March 31, 1999, June 30,
1999, and September 30, 1999, all of which were true and correct as of the date
of filing and remain true and correct. CBQI has provided to ChinaSoft full
access to any and all information desired concerning the business and operations
of CBQI, and CBQI has made available to ChinaSoft such personnel as has been
requested to answer any and all questions which ChinaSoft may have had
concerning an investment in CBQI. CBQI is current in all of its required reports
under the Securities Exchange Act of 1934. CBQI is current in its filings with
all federal and state taxing agencies, including, without limitation, the
Internal Revenue Service. CBQI has delivered to ChinaSoft its annual report on
Form 1120, which was true and correct as of the date of filing and remains true
and correct. No taxes are due any federal or state agency.
All SEC filings concerning CBQI and its predecessors filed to date comply with
the Securities Act and the Securities Exchange Act in all material respects. The
SEC filings concerning CBQI do not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they will be made,
not misleading. None of the information that CBQI will supply or which CBQI has
supplied in connection with this Agreement will contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they will
be made, misleading.
4.07. No Undisclosed Liabilities or Obligations. CBQI has no obligations or
liabilities of any nature (absolute, accrued, contingent or otherwise, and
whether due or to become due, herein liabilities) except liabilities fully
reflected or reserved in the balance sheet filed as a part of the Form 10 QSB
dated September 30, 1999, or which have been incurred in the ordinary course of
business since that date.
<PAGE>
4.08. Litigation. Except as provided for on Schedule 4.08 hereto, there is no
legal, administrative, arbitration or other proceeding, claim or action of any
nature or investigation pending or threatened against or involving CBQI, or
which questions or challenges the validity of this Agreement, or any action to
be taken by CBQI pursuant to this Agreement or in connection with the
transactions contemplated hereby, and CBQI does not know or have any reason to
know of any valid basis for any such legal, administrative, arbitration or other
proceeding, claim or action of any nature or investigation; further, CBQI is not
subject to any judgment, order or decree entered in any lawsuit or proceeding
which has an adverse effect on its business practices or on its ability to
acquire any property or conduct its business in any area.
4.09. Compliance with Law. CBQI is in compliance with all laws, regulations and
orders applicable to its business; further, CBQI has not received any
notification that it is in violation of any law, regulation or order and no such
violation exists.
4.10. Disclosure/Notices and Consents to Third Parties. No representations or
warranties by CBQI in this Agreement contain any untrue statement of fact or
omit to state any fact necessary in order to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading; further, there are no facts known to CBQI which (either individually
or in the aggregate) could or would materially and adversely affect or involve
any substantial possibility of having a material, adverse effect on the
condition (financial or otherwise), results of operations, assets, liabilities
or businesses of CBQI which have not been disclosed in this Agreement.
CBQI will give any notices (and will cause each of its subsidiaries to give any
notices) to third parties, and will use its best efforts to obtain (and will
cause each of its subsidiaries to use its best efforts to obtain) any third
party consents, that ChinaSoft, Inc. may request in connection with this
Agreement.
4.11 Continuity of Business Enterprise. It is the present intention of CBQI to
continue at least one significant historic business line of ChinaSoft, Inc., or
to use at least a significant portion of ChinaSoft, Inc.'s historic business
assets in a business, in each case within the meaning of Treas. Reg. Section
1.368 1(d).
<PAGE>
4.12 Regulatory Matters and Approvals. CBQI will (and will cause its
subsidiaries to) give any notices to, make any filings with, and use its best
efforts to obtain any authorizations, consents, and approvals of governments,
and governmental agencies which may be necessary to carry out this Agreement and
the transactions contemplated therein.
4.13 Necessary Steps. CBQI will use its best efforts to take all action and do
all things necessary, proper and advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of any conditions).
4.14 Noncontravention. CBQI represents and warrants that neither the execution
or delivery of this Agreement, nor the consummation of the transaction
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which CBQI is subject or any
provision of the charter or bylaws of CBQI, or (ii) conflict with, result in the
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which CBQI is a party or by which it is bound or to which any of
its assets is subject.
ARTICLE V: General Provisions
5.01. Waiver. Any failure on the part of any party to comply with any of its
obligations, agreements or conditions hereunder may be waived in writing by the
party to whom such compliance is owed; however, waiver on one occasion does not
operate to effectuate a waiver on any other occasion.
5.02. Notices. All notices and other communications under this Agreement shall
be in writing and shall be deemed to have been given on the date of receipt if
delivered in person or three days after such is sent by prepaid, first class,
registered or certified mail, return receipt requested, or, again, on the date
of receipt if sent by facsimile as follows: if to CBQI and/or Acquiring
Corporation, Mr. John Harris, 4851 Keller Springs Rd., Ste. 228, Dallas TX,
(972) 732 1100; and if to ChinaSoft, Mr. Bart S. Fisher, 1667 K Street NW, Suite
1100, Washington, DC 20006; (202) 778 3000.
5.03. Entire Agreement. This Agreement (and the documents, notes, lists and
other agreements executed in connection herewith and on the Closing Date)
constitute the entire agreement between the parties regarding the subject matter
hereof, and supersedes and cancels any other agreement, representation or
communication, whether oral or written, between the parties and relating to the
subject matter of this Agreement.
<PAGE>
5.04. Headings. The article and paragraph headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
5.05. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of District of Columbia.
5.06. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute but one and the same instrument.
5.07. No Oral Modification. This Agreement may be amended solely in writing, and
only after the mutual agreement of all parties.
5.08. Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants in this Agreement shall survive the
Closing Date for a period of three years, at which time they shall expire.
5.09. Severability. The invalidity or unenforceability of any one or more of the
provisions of this Agreement shall not affect the validity or enforceability of
any of the other provision, and this Agreement shall be construed in all
material respects as if such invalid or unenforceable provision were omitted.
5.10. Successor and Assigns. This Agreement, and each and every provision, shall
be binding on and inure to the benefit of the parties, their respective
permitted successors, successors in title and assigns, and each and every
successor in interest to any party, whether such successor acquires such
interest by way of gift, purchase, foreclosure, or by any other legal method,
who shall hold such interest subject to all of the terms and conditions of this
Agreement.
5.11. Expenses. Each party shall pay its own expenses incurred by or on behalf
of it in connection with the authorization, preparation, execution and
performance of this Agreement.
5.12. Due Diligence. Both parties shall have until January 14, 2000, to conduct
whatever due diligence is reasonable and necessary to verify the truth and
accuracy of the representations and warranties made in Articles II and IV
hereof. Either party, as the case may be, shall have the right to rescind this
Agreement in case of a material breach of the above referenced representations
and warranties.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered on December 22, 1999.
CHINASOFT, INC., a District of Columbia corporation
By: /s/ Bart S. Fisher
Bart S. Fisher, President
CBQ, Inc., a Colorado corporation
By: /s/ John Harris
John Harris, Chairman & CEO
TRI BEAU ACQUISITION COMPANY, a District of Columbia corporation
By: /s/ John Harris
John Harris, Chairman & CEO
